This Gudi Padwa Know about the different types of Home Loans and choose your best fit

Gudi Padwa just went by, and like every year banks and finance institutes all over the country are offering attractive deals on home loans. This is the time of year when everyone is in a hurry to get their finances in order. With loan rates being favourable, now perhaps the best time to get your housing finance. The financial is coming to an end soon, which means most of us will be receiving handsome bonuses as well. This makes the coming few days the best times for us to invest in new things, be it property, automobiles or any other sort of investment.

For someone who is new to the world of finance or, has recently started earning, understanding home loans and home loan interest rates can be quite daunting. But this knowledge can help you make good financial decisions, in the future if not immediately.

The most basic thing you need to know about house loans is that they have two main types of interest rates. These are fixed and floating interest rates. Banks and non-banking financial companies offer both fixed and floating interest rates. Since home loan interest rates are the most important aspect of the loan, getting it right is the key to repay without any financial stress or default over time.

Here are a few key things that you should know about home loan interest rates.

1.  Fixed rate of interest on a loan means that the equated monthly installments or EMIs are constant over the tenure of the loan. On the other hand, for floating interest rates, the EMIs fluctuate as per the market dynamics as interest rate increases or decreases.

2.  Fixed interest rates are always set higher than floating interest rates, by 1 to 2.5% at the time of the sanction of the loan. This can be both and advantage and a disadvantage. Since these rates remain constant you don’t have to worry if there is a hike in the housing loan interest rates due to the passing of a bill or implementation of a new rule, but at the same time if the rates see a dip, there is no benefit to you.

3.  Floating interest rates are usually lower than fixed interest rates although parameters like inflation and current account deficit are used in calculation of base rate by RBI which can mean an uncertainty and different EMI for each repayment or installment for the loan. This can be difficult to keep track of as each installment may be different.

These are the most basic things you should know about housing finance, there is much more to learn, but as they say, if you’re clear on your basics you should be able to make wise decisions about your finance.

What you should know about home loan interest rates before you get a loan

Gudi Padwa just went by, and like every year banks and finance institutes all over the country are offering attractive deals on home loans. This is the time of year when everyone is in a hurry to get their finances in order. With loan rates being favourable, now perhaps the best time to get your housing finance. The financial is coming to an end soon, which means most of us will be receiving handsome bonuses as well. This makes the coming few days the best times for us to invest in new things, be it property, automobiles or any other sort of investment.

For someone who is new to the world of finance or, has recently started earning, understanding home loans and home loan interest rates can be quite daunting. But this knowledge can help you make good financial decisions, in the future if not immediately.

The most basic thing you need to know about house loans is that they have two main types of interest rates. These are fixed and floating interest rates. Banks and non-banking financial companies offer both fixed and floating interest rates. Since home loan interest rates are the most important aspect of the loan, getting it right is the key to repay without any financial stress or default over time.

Here are a few key things that you should know about home loan interest rates.

1.      Fixed rate of interest on a loan means that the equated monthly instalments or EMIs are constant over the tenure of the loan. On the other hand, for floating interest rates, the EMIs fluctuate as per the market dynamics as interest rate increases or decreases.

2.      Fixed interest rates are always set higher than floating interest rates, by 1 to 2.5% at the time of the sanction of the loan. This can be both and advantage and a disadvantage. Since these rates remain constant you don’t have to worry if there is a hike in the housing loan interest rates due to the passing of a bill or implementation of a new rule, but at the same time if the rates see a dip, there is no benefit to you.

3.      Floating interest rates are usually lower than fixed interest rates although parameters like inflation and current account deficit are used in calculation of base rate by RBI which can mean an uncertainty and different EMI for each repayment or instalment for the loan. This can be difficult to keep track of as each instalment may be different.

These are the most basic things you should know about housing finance, there is much more to learn, but as they say, if you’re clear on your basics you should be able to make wise decisions about your finance.

Your guide to understanding income tax benefit on home loan

Just like property in India is a good investment, home loan India too are a great investment. With property rates soaring, it’s not really possible for the common man to purchase a property of his own without opting for home finance. But with so many taxes that already get deducted from your income can you really afford to pay your monthly EMIs?

Well, the Income Tax Act has made provisions for home loan borrowers, so that they can finally fulfill their dream of having a home of their own. There are three sections in the Act that give you tax benefits on home loan. You should know these because they are handy tax saving calculators. Here’s what they are.

1.  Section 80C: This section states that you can claim tax benefits of up to Rs 1.5 lakhs on repayment of the principal amount of your loan.

2.  Section 24: This section states that you can claim tax benefits of up to Rs 2 lakhs on repayment of interest on housing loan but this is only applicable for a self-occupied property. If you are renting out your property then there is no maximum limit on the tax benefit amount. So, you can claim the entire interest amount as a tax benefit. You can do this even if the amount exceeds Rs 2 lakhs.

3.  Section 80EE: This section states that if you are a first-time buyer then you can claim an extra Rs 50,000 as tax benefits on the interest repayment.

There are many tax benefits on home loan but, there are certain conditions that you need to fulfill to be able to claim them. The first and foremost condition is that you can only start claiming income tax benefit on home, once the construction of your new property is complete. These tax benefits do not apply to under construction properties, even if the borrower has already started paying EMIs. But there is an exception to this rule. You can get a benefit if the construction ends within five years of you taking the loan. Earlier this was only three years. This period has been revised because of the rising number of stalled constructions in recent times.

If you opt for a joint loan, to enjoy income tax benefit on home loan, the second party has to be a co-owner as well as a co-borrower. They can then claim tax benefits on their home loan interest rate separately. They can only do this when their individual share of the property is clearly defined. The ratio of tax benefit is the same as the ratio of the property share.