Having a place to call your own is something that many of us aspire to. It’s not uncommon to take a Home Loan to achieve your dream of owning a house. We look at things like EMIs, interest rates, processing fees, etc. and we do so much research that we’re practically experts on the topic! But here are a few things about Home Loans we bet you didn’t know.
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Not everyone is eligible to apply jointly for a Home Loan
People often take joint Home Loans in order to be eligible for a higher loan amount. And while most people – married couples, parents and children, and brothers – are allowed to take a Home Loan together, banks do not extend this option to everyone.
We bet you didn’t know that banks generally do not offer loans to sisters, friends, and unmarried couples.
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Your home, your loan
Now here’s a situation that you might find yourself in. Say, you and your spouse decide to buy a house together. You have enough funds to cover half the cost of the house and would prefer not to take a Home Loan. Your spouse, however, needs to take a loan to pay their share. Did you know that when your spouse applies for a loan, the bank will ask you to be a co-applicant as well?
As you are also going to be one of the home owners, you too will have to become a co-borrower. Even though you are contributing half the amount from your own funds and do not technically need a loan, the bank will insist on you being a co-borrower.
If a house or flat is to be registered in two or more people’s names, banks require all co-owners of the property to be co-borrowers of the loan.
Additional Reading: Does It Make Sense To Opt For A Joint Home Loan?
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Women power
Did you know that if you’re a woman, you are entitled to a slightly lower interest rate when you apply for a Home Loan?
Yes, it’s true. So, what can you do if you aren’t a woman and want the benefit of a lower rate? Well, you can have your wife or mother apply for the loan along with you. However, keep in mind that the woman will need to be the primary loan applicant in order to benefit from the lower rate.
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Tax benefits, anyone?
When it comes to tax benefits, a Home Loan gives you benefits under not one but two sections of the Income Tax Act!
That’s right. When you take a Home Loan, you can get a tax deduction under Section 80C for the principal amount of your loan (up to Rs. 1.5 lakhs) and under Section 24(b) for the interest amount (up to Rs. 2 lakhs). Moreover, if you take a joint loan, both applicants can claim the deductions. So, this takes the total deduction amount up to Rs. 3 lakhs for the principal component and to Rs. 4 lakhs for the interest repayment amount.
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Give some, take some
Were you aware that banks give you a loan of only up to 80-90% of the value of your home? The remaining 10-20% needs to be paid by you. So, if you’re planning to invest in a home, start saving up now!
Looking for a smart way to save? Try a Fixed Deposit. They are considered to be one of the safest investment avenues.
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How ‘fixed’ exactly is a fixed rate of interest?
When you apply for a Home Loan, you can opt to either have a fixed or floating rate of interest. But, did you know that when you opt for a fixed interest rate, it is generally fixed for a certain number of years and not for the entire tenure of the loan?
BB Pro Tip: Go through your loan agreement carefully to check for a reset clause on your loan interest rate.
Additional Reading: Understanding Fixed & Floating Interest Rates On Home Loans
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Interest first, then principal
Did you know that when you start to repay your Home Loan, you first pay off the interest component and only then the principal amount? So, in the initial years, the interest component will be high. For example, if you were to take a loan of 30 lakhs for 20 years, at an interest rate of 10%, the EMI amount would be Rs. 28,951. In the first year, the interest amount will be Rs. 2,48,486 and the principal amount will be Rs. 41,022.
Want to check how much the interest and principal amount on your Home Loan is? You can use the BankBazaar EMI calculator to find out. Click here
BB Pro Tip: If you plan to make prepayments on your Home Loan, it is best to do it in the initial years when the interest component is high.
Additional Reading: What Is EMI And How Is It Calculated?
Food for thought, huh? Understanding everything about your Home Loan might seem like a task but hunting for the right one, comparing across loan providers and applying for one doesn’t have to be difficult. BankBazaar can help you find a loan that’s perfect for you. All you have to do is click on the button below to check your eligibility.
Do you have a little-known fact to share about Home Loans? Share it with us in the comments section below!