The choice of buying a home is a significant financial decision, and taking this decision requires careful consideration based on several issues. Purchasing a house can be accomplished in two ways: either by taking out a home loan or by paying the whole amount upfront. If you are already financially secure, you may not feel the need to take out a loan and pay additional interest on the loan amount.
However, many individuals still opt for a home loan to buy their first home and pay affordable EMIs as per their income and expenses, and the same can easily be anticipated using an HDFC home loan EMI calculator. You might now be curious about why to avail a home loan over an upfront cash payment, so we have curated a list of comparison stating how one can benefit from both these options:
Interest rate on home loan on a down-slide
Since 2019, the RBI mandated the lenders to provide floating and fixed Interest rates on home loans to the borrower, according to their choice. The impact has been such that the rates have decreased over time, and they continue to do so at a steady pace, which is hugely beneficial if you’re planning to take out a home loan in the near future. Still, banks have been offering lower interest rates, such as the HDFC home loan interest rate is amongst the lowest, around 6.70% pa, and also offers various benefits for women and salaried professionals.
Benefits from taxes
Availing a home loan instead of paying with cash payment is a debate that often focuses on the tax advantages of both the prospects. As per the Income Tax Act, under section 80C it is sanctioned that an individual can file for a deduction up to Rs. 1.5 lakh per year for the principal loan repayment amount. If you or your family use the borrowed property as your primary residence, you may file for an additional deduction of Rs. 2.0 lakh from your home loan interest payment.
Freedom of Investment
Buying a home is a considerable commitment that requires you to put in and lock a substantial amount of money towards a specific purpose. Even if you have the cash in hand to buy a house all at once, it is advised by senior advisors to take out a home loan for additional benefits. For a decent start, you may put up a good amount as down-payment and spread the rest over an extended period in monthly EMIs. To have an idea about the various situations, you can use the HDFC home loan EMI calculator.
There are no worries about exorbitant interest rates or longer repayment terms, and you can still afford the loan. If you still have money left, you can consider diversifying your assets rather than blocking them. While diversifying your investment portfolio, you’ll also be able to maximise your earnings.
Availability of emergency funds
When you take out a home loan, you’ll be able to use the remaining part of your savings to cover unexpected expenses that may otherwise keep you up at night. In the event of a medical emergency, when you have no funds, you may find yourself in a predicament. You might have health insurance to overcome these situations, but it doesn’t cover every illness or condition. Such cases necessitate having emergency funds in hand at all times. With an emergency fund, you’ll have the money you need to pay your home loan EMIs in times of financial crisis. As a result, opting for a house loan rather than putting all of your funds into a single investment is better.
Better scope of properties
If you choose to opt for the cash payment for a property, you will have limited options due to limited availability of funds, but that is not the case when you opt for a home loan. A down payment in cash with an additional amount as availed under a home loan is preferable. You can use the additional pool of money to buy a better house with a larger carpet area, at a better location which any day offers a greater return on investment.
A home loan is considered to be one of the most affordable debts you can choose from as the rate of interest are always at minimum, revolving around the repo rate. Banks and other housing finance companies (HFCs) provide a reasonable interest rate on home loans on the basis of various factors, being among the lowest HDFC home loan interest rate offer comes with a repayment tenure of up to 30 years. Thus, in case you are looking for a home loan, you can visit Andromeda loans and get to know in detail about which one to choose from as per your requirements.