Understanding the basics of home loans!

With the advent of affluence and prosperity ushered in by economic liberalization there has been steep rise in number of Indians wanting acquire one or more houses in urban localities. This has further led to marked increase in prices of real estate across the country. Every earning individual in India today contemplates owning dream home of his own. One of the major factors contributing to this demand is also the easy availability of home loans from various financial institutions. There has been a sea change in attitudes of Indians towards borrowing for owning a home. Today it is a smart financial move to avail a home loan and own a property given the kind of escalation such properties are witnessing.

What is a Home Loan?

Simply speaking a home loan is a credit available to individuals to buy, construct or renovate a residential property. Since it is not possible for the majority of the people to have ready cash available for outright purchase of a house and it does not make snese to wait till one has saved enough the home loan becomes a preferred tool to get funds and buy a home which can be subsequently repaid through convenient equated monthly installments over a long period of time. Typically the home loans that area available in the market range around 5 times the annual income of an individual. Thus anyone with a annual income of around Rs. 5 Lakhs can easily get a loan to buy a house that is worth around Rs. 25 Lakhs.

Key Benefits of taking a Home Loan

There are several wonderful benefits of availing a home loan in today’s scenario which makes it the most popular choice among customers.

• Since it is not within the reach of an average individual to accumulate adequate funds to buy a house taking home loans are the only practical solution in this regard.
• For people staying in rented accommodation it makes great sense to buy a house. Amount that they spend towards paying the rent can now be used to pay the EMIs while staying a house of their own.
• Buying a home through a loan for which one can pay over a long tenure also means that at the end of the tenure there is a huge asset available.
• The income tax department offers a plethora of benefits to people who are repaying home loans in terms of rebates and exemptions.

Special Features of Home Loans

There some features which are specific to home loans as compared to other forms of credit.

• The repayment periods for home loans are long extending for up to 20 years.
• The house purchased through the loan remains mortgaged with financer till the complete repayment of the loan.
• Usually the interest rate of home loans is lower than the other loans.
• There are fixed rate, floating rate and adjustable rate home loans available in the market today.
• Repayment of home loan is eligible for exemptions in tax.

The great features and superb benefits that are associated with it make home loans the smartest means of acquiring your dream home.