Housing Finance: Home Loan

HOME LOAN

Home is an integral part of an individual, who since his / her birth and childhood, dreams to have living space of his / her own. Once in a lifetime investment requires loan to accomplish it and that is how the home loan comes into scheme of things. Buying a home is dream for everyone. Owing to the rising price of properties, it has almost become impossible for an average earning person to buy a home on a lump sum payment. Therefore, the concept of home loan has come in existence. There are plethora of housing finance companies and equal number of banks that offer home loans. The task of selecting one company and one offer for home loan amidst the thousands available options have become a very complex task owing to the burgeoning housing finance market in the country. Apart form this, there are intricate business jargons and technicalities that make this task more difficult. In this study, so that when a person applies for the home loan, he / she can understand the basics and help themselves remain away from the duping elements in the market.

Importance of Home Loan

The need for home loans arises not because property prices are heading upwards all the time but because home loans make great. Sense form a long-term savings perspective. Not only are home loans a handy tool for the common man to own a roof over his head but they also help save money in the long run.

With skyrocketing real estate prices, people are increasingly opting for housing loans to acquire their dream home. Interest rates are coming down all the time and the banks and the housing finance companies are literally falling over each other to lure the prospective home-

seekers.

Notwithstanding the tax breaks and generous lending rates, a lot of people still cannot arrange resources for the down-payment, which comes out to be at least 15 per cent of the property value. Taking cognizance of the situation, Banks are 100 per cent funding is provided for select properties. These lucrative offers are other major reasons for why people are opting for loans.

Even  if  one  can  afford          to      buy  a         home with  one's  own  money,  loans should    be availed   because       they   act     as      good  saving   instrument. According to industry

estimates, the long term average return in investing in a home is about 20% p.a. while the average cost of borrowing funds in the market today is about 7% p.a. (considering all tax breaks.)

For salaried employees, housing loans are the best way to avail of tax benefits. Many people simply go for the home loans in order to avail these benefits. Interest payments up to 1.5 lakh on housing lousing loans re deductible from the taxable income and there is a further deduction of taxable income maximum up to 1 lakh against repayment of principal portion per annum. In case a person stays in a rented house, the cost of the loan will be nearly zero per cent since he will be saving a decent amount on rent.

All the banks offer many types of loan and advances to the customers like retail

loan, term loan, working capital finance, overdraft, export import finance and project finance. Sine this study is based on home loan and home loan is part of retail loan various types of retail of retail loan are explained previously.