Today, buying a house without the help of a home loan is almost unheard of. However, many people are in two minds when it comes to applying for housing loans. This is mainly because they are worried about the high home loan rates. This is why they prefer to just stay on rent until they can strengthen their financial capacity.
But this should not be the reason that comes between getting a home that you have always dreamt of. Wondering why? Here are 5 reasons why home loan interest rates are not as intimidating as they appear to be:
- Home loan interest rates in 2021 are at an all-time low
RBI has lowered the repo rates on many occasions in recent times. This has resulted in the home loan rate taking a dip too. In fact, lenders are now offering home loan interest rates at around 7%, which is at an all-time low. A few years ago, borrowers were applying for housing loans with about 8.5-10% interest rates. Since these loans usually have long tenures, even a slight difference to the home loan interest rate can make quite the difference in EMIs.
- Interest paid on a home loan can be claimed for tax deductions
Under Section 80C of the Income Tax Act of 1961, the principal amount of the loan can be used for tax deduction up to a maximum amount of Rs 1.5 lakh annually. In addition, under Section 24 of the Income Tax Act, the housing loan interest can also be claimed for tax deduction of up to Rs 2 lakh annually. Therefore, in total, it is possible to claim tax deduction up to a total of Rs 3.5 lakh per year.
- A home loan balance transfer is always an option
It is quite possible to have a loan plan with a high interest rate and later find a lender offering a lower rate. This does not mean that you have missed out on a better deal. There is always an option of going for a loan balance transfer. With this transfer, the loan amount would get transferred to the new lender with the revised housing loan interest rate.
- A good credit score can make lenders offer lower rates
Everyone knows how important a credit record is for getting a loan. But that’s not all! A good CIBIL record shows trustworthy repayment patterns, making the loan application a low-risk deal for the lender. In such a case, it is quite possible for the lender to offer a lower interest rate on the home loan.
- Lenders provide flexible repayment options
To ease the repayment process, lenders offer many options to their borrowers. For instance, there are step-up loans where the EMIs start low and keep increasing as the tenure passes. This makes it easy to pay the initial EMIs and start paying bigger amounts as tenure progresses, during which your income will improve too. Lenders also offer step-down EMIs, where the interest portion in EMIs are higher in the initial years and gradually decrease over time. Choose any repayment plan that is suitable to your income and budget.
Lastly, always make use of a home loan calculator. It is a free online tool that will help in giving accurate results of the home loan EMIs. Doing this will make it easy in understanding whether the interest rate being offered by the lender is affordable or not.