Fancy owning two properties? Need to take two home loans? Don’t fret, for it is a common misconception that one cannot avail of two housing loans at the same time. If you have the ability to pay back your EMIs, you can take multiple home loans at the same time. But make sure to discuss the prospects of taking another home loan with your lender to ensure that you can avail yourself of the benefits of having multiple housing loans.
Who can avail of two home loans?
- Sufficient income: Banks and NBFCs will thoroughly evaluate your assets and income sources to assess if you have the ability to pay back the second personal loan. If you have the sufficient recurring income to pay back the amount, you will receive a second home loan.
- Excellent credit history: You must have a high CIBIL score and an excellent credit history to obtain another home loan. Lending institutions will evaluate your previous experience with debts and if you have a clear track record, you can avail of another home loan.
- Stable debt to income ratio: You must have a good record of clearing debts or have many past ongoing loans like car loans, gold loans, and loans against property to be given another home loan. However, if the lending institutions verify that you have sufficient income to pay back all the EMI amounts, you can get another home loan.
Benefits of having multiple home loans
- Avail interest amount tax benefits:
Under Section 24B of the Income Tax Act, you can claim tax deductions for interest payable on renovation, repairs, and loans. The upper limit of your tax deduction amount is restricted to INR 2 lakhs per annum. If you have two properties, the rent amount from one of them would be taken into account for tax deductions under Section 24 of the Income Tax Act, also known as ‘Deductions from income from house property’. If you have more than two properties, the net annual income from all of them is taken into account. You can claim the total tax reimbursement amount for the entire interest period against the rent received from one of the houses.
The tax deduction can be done for both commercial and residential purposes. If the loan was not sanctioned by a bank or NBFC and your friends or family offered you credit, you can still apply to claim these benefits. You can claim any amount of interest paid during the construction of a house in five installments of equal value, from the time of construction to the possession period.
- Avail principal payment tax benefit:
After the possession of your home, you can avail INR 1.5 lakh rupees for the principal payment of your home loan, including stamp duty charges and registration costs, as stated under Section 80C of the Income Tax Act. This benefit is only applicable after the possession is complete. Note that such benefits cannot be claimed for loans taken from family or friends.
- Pay for repairing costs:
If you need to repair or reconstruct a portion of your house during the loan repayment period, you can avail yourself of another top-up loan to bear these charges. Top-up loans do not count as two loans for the same property but as multiple loans. They have lesser interest rates, and both their principal and interest amounts are tax deductible under Sections 80C and 24.
Things to note when applying for multiple home loans
Unlike the previous generation, we no longer have the luxury to enjoy a debt-free life, nor do we think that all debts are paid. Home loans, if planned after considering your income and assets, can help you save lots of tax money.
- Only bite off what you can chew:
Finance experts recommend using only 40% of your salary to pay your EMIs. It is tempting to buy more properties and make use of the tax benefits from multiple home loans. Since your credit history allows you to take a large amount, people often take up huge amounts of housing loans. While it may seem that you can pay it off by budgeting your expenses, you will most likely not be able to live stringently at all times. Living a life with no outings and dinners with friends is not sustainable in the long run, no matter the tax benefits you may gain.
- Be careful about the ‘formalities’
Most married individuals tend to list their spouse as a co-applicant when applying for multiple home loans. It is seen as a formality but can lead to long-term repercussions. For example, if your partner does not have an income, then in the event of you being unable to pay your EMI, the state will possess your property.
You must consult your lender before applying for two or more housing loans. They will evaluate your income and existing assets and help you make more informed decisions. You can also explore the best home loans online at Andromeda.