For many homebuyers opting for the home loan is a preferred choice as the many interested buyers aren’t able to pay the total amount to the real estate developers; thus, they need to opt-in for the loans to buy the dream homes. The borrowers need to maintain a good credit score to avail of the loan facility. The borrowers also need to submit all the necessary documents to fulfill the applicant’s loan eligibility criteria. The borrower should apply for the loan to avail long term credit repayment moratorium for buying the dream home. For most flat buyers, it is highly recommended to opt for loans to purchase homes in the early stages of life. If the applicant is below the age of 30 years, then, in that case, he/she can avail of the loan for a maximum moratorium of the next 30 years.
According to his/her age criteria, the applicant should avail of the loan for a maximum tenure so as lessen the burden of monthly EMI. At a lesser amount of the monthly installments, the borrower can comfortably pay the shorter amount of monthly installments and utilize the remaining monthly income for the other necessities or another household purpose. Also, on payment of EMI, the borrower can avail of the tax benefit for a longer duration to save money and reduce the tax payment burden for individuals.
Following are the benefits of the loans being opted for the long term:
- Tax benefits on home loans:
The borrower can benefit from tax filing to save money or lessen the burden on expenditure during the moratorium of loans. The borrower can avail of tax exemption of up to Rs.2 lakhs beyond the exemption limit of Rs.2.50 lakh.
- Long term moratorium available for the home loans:
The borrowers can repay the loans for a long duration of years, depending on the borrower’s age. The borrower can avail a maximum term of up to 30 years for the repayment of the loans if the applicant takes a loan up to the age of below 30 years. For the higher age of beyond 30 years, the borrower can avail of the loan for the duration of up to retirement age. The higher the loan moratorium lesser is the monthly installment the borrower has to pay in case of loan repayment.
- Opportunity to grow your funds:
Even if the borrower can buy the property on his funds, the borrower can still benefit from tax repayment. The existing funds can be put in stocks or mutual funds by the borrower; thus, the borrower can get the returns on the investments and utilize those funds in repayment of loans. The borrower can also invest in systematic investment plans SIP to get quick returns on investments, and the increased value can be utilized to repay the installments on time. There are multiple ways to invest, like fixed deposits, mutual funds, stocks, or systematic investment plans, to get higher returns on investments.
- Liquidity benefits:
Suppose the borrower feels a liquidity crunch and is forced to take a financing facility like a personal loan or a collateralized loan. In that case, it may cost you much more interest than your home loan interest amount. The funds can help protect the financial difficulties and help other financial goals.
- Due diligence of property by the bank:
Banks exercise strict due diligence before financing a project, something that reduces the risk to a great level. They verify the scheme-related documents, their title, and clearance before approving a loan. So if the home loan is taken from the bank, it becomes safer than an un-approved project. There is no answer to the home loan dilemma. Using the owned funds to buy a home can be a good step when you are assured that it would not affect your finances.
- Longer tenure loans assure higher eligibility:
An individual’s ability to repay the home loan depends on the individual’s ability to repay the loans on time. This, in turn, is assessing based on the disposable income. Thus for a shorter tenure, all the things are being equal, your EMI will be higher. Therefore the borrower would be eligible for a smaller home loan than the actual eligibility. For a longer tenure or higher eligibility, long-term loans are more beneficial. Also, the banks or financing companies always need a long-term recurring business to keep the active loans open.
- More extended repayment have more extended flexibility in case of the long term loans:
As there are no charges applicable to pre-payment of home loans under a floating rate of interest, you can pay the entire outstanding or part of the home loan if the borrower wants to sell the house or free any debts. Moreover, if the loan is under the fixed rate of interest, you can prepay the entire outstanding every year without any pre-payment penalty. Thus the borrower can pay the debt-free earlier while retaining the flexibility of payments according to the cash flows.
Thus, we conclude that if the borrower opts for the longer duration home loan, the applicant can avail more extended duration tax benefits and lower payment of monthly installments, thus helping reduce the burden on repayment of dues. Also, the banks encourage the borrowers to take loans for a higher duration of time as they expect more and more recurring business from the individuals.