Look into these pointers before going for a home loan:
1.Decide your repayment capacity.
Only if you are confident to repay the principle amount of the loan, only then acknowledge the loan amount, else back out. The lenders will accept your loan application only if they find your cash inflows and outflows to be credible. Also, ensure that the loan EMIs do not exceed more than 40-50% of your take home salary, else your finances could be in trouble. Your age and salary structure is also taken into consideration, the stipulation of which is specified by banks at the time of submitting your loan application.
2.Rope in a co-borrower:
Since, one cannot change their salary structure jjuts for availing a huge sum of loan, you can assign a co-borrower to your loan so that you can get your desired loan amount devoid of salary structures. Most banks comply with this initiative if the co-borrower is your spouse, since disputes property is likely to arise in case of siblings or business partners.
3.Negotiate on your interest rate:
First, do some ground level shopping, or even better log on to our site to get the best deal on loans and their interest rates. Once you get a thorough understanding of that, approach your bank and bargain on reducing the interest rates on your loan. If there seems to be no relief with that, try negotiating on the reduction in the processing fee, legal fees etc. Chances are there that they might be waived off.
4.Opt for a current account linked home loan:
If you’re a business person then you can link your home loan to your current account, such that the balance in the current account gets adjusted against the outstanding loan, thus bringing down your effective loan and reducing the interest.
“Parking surplus funds, deposits or even crediting salary for a day would reduce the outstanding loan. Interest is calculated on the daily outstanding balance so that every rupee of balance in the HomeSaver account each day counts towards saving on the loan interest,” says Shyamal Saxena, general manager, retail banking products, Standard Chartered Bank .
5.Seek tax benefits:
The repayment of principal for a home loan, for instance, is eligible for a deduction of up to Rs 1 lakh a year under Section 80C. This is especially useful for borrowers who are paying a huge EMI and, therefore, don’t have too much to invest in other tax-saving options. Up to Rs 1.5 lakh a year is deductible from the taxable income of the borrower under Section 24(b).
6.Rent out your apartment:
If you live in a city and have your house in the other part of the state or in any other state, try letting it out since up to Rs 1.5 lakh a year is deductible from the taxable income of the borrower under Section 24(b).
In some cases, the disbursement of the loan is linked to the stages of construction of the property. The tax treatment is different here. This portion of the interest paid prior to the completion of construction cannot be claimed as a deduction in the year in which it is paid. However, the borrower can claim deduction for the interest under Section 24(b) in five equal instalments after the construction is completed. Do note that the limit on deduction in a year remains Rs 1.5 lakh
7.Avail tax benefits even if you have more than 1 property:
Benefits under Section 80C and Section 24(b) can be taken for more than one home if all the properties meet the requirements. Irrespective of the number of homes, the limit of Rs 1 lakh under Section80C and Rs 1.5 lakh under Section 24(b) still apply. However, if the house has been given out on rent, there is no limit on the deduction of the interest paid for that loan.
8.Opt for a joint home loan:
Availing a joint home loan gives you the optin of availaing tax benefits individually, by the co-owners. You can even pay your EMIs in a proportion as stipulated by you in the loan document. You can also make simultaneous repayment of the principle amount of the loan so that the debt can be overcome soon.
Availing loan from relatives is also applicable for a tax break, however you do not receive a tax benefit in case you purchase plots or lands.
9.Prepay your loan:
Try to prepay your loan as soon as possible, since in these phases where there is a rise in the interest rates, it can burden your finances and slowdown your EMI payments.
10.Do not sell your property to sson:
If you sell your property within 3 years of purchases, you will not be entitled to availing a tax break. The Income Tax Act states that if the property is sold within five years from the end of the financial year during which it was bought, the tax deductions claimed will be added to the income for that particular year and taxed at the marginal rate of tax.