Why some people choose home loan even if they have money? 4 key benefits

Priya Vishwakarma

Aug 28,2024

Many individuals who have the required funds still choose to take a loan from a bank when purchasing a home. Why? Because home loans offer several significant advantages. Here are four key benefits:

Home Loan Benefits: First Advantage

It ensures the property you are purchasing is free from disputes. Before approving the loan, the lender thoroughly checks the property’s title and records to confirm that it is legally sound.

Home Loan Benefits: Second Advantage

The second significant benefit of a home loan is the tax savings. When you buy a house with a home loan, you can save substantial amounts on taxes each year.

Save up to Rs 2 lakh annually

Current tax laws allow a deduction of up to Rs 2 lakh annually on interest payments under Section 24(b) of the Income Tax Act.

Claim tax exemption of up to Rs 1.5 lakh

Additionally, under Section 80C, you can claim a tax exemption of up to Rs 1.5 lakh on the repayment of the principal amount. If the loan is taken jointly with a co-applicant, both individuals can claim separate tax benefits, potentially saving up to Rs 7 lakh in total taxes.

Home Loan Benefits: Third Advantage

Home loans typically have lower interest rates compared to other types of loans. Experts believe that interest rates on home loans may become even more favorable in the future. Therefore, instead of using your savings to purchase a home, it’s often wiser to take a home loan with better interest rates, allowing you to preserve your savings for retirement and other future needs.

Home Loan Benefits: Fourth Advantage

Another benefit of a home loan is the option to top it up. If you buy a semi-furnished or older property, the cost of renovations and interior work can be significant. Instead of dipping into your savings or taking out a personal loan, it’s more cost-effective to use a top-up on your home loan.

Top-up loans are cheaper

Top-up loans are cheaper than personal loans, have no hidden charges, and offer more flexible repayment terms.