Why take a home loan even when you have sufficient funds?

Posted by Anurag Mishra on July 11th, 2017

There’s a misconception that’s been going around for years that home loans are for people who cannot afford to purchase a home upfront. This however is wrong! Rather, a home loan is a tool that makes home ownership easy, so that people who wish to buy their dream home can do so with utmost convenience.

Some people think that the home loans interest rates will get them into financial jeopardy and cause their income source to get strained. Some would rather save and grow their money over time to purchase a house. But really all you need to do is take a home loan, even if you have the funds.

Why?

Because going in for a home loan has many advantages over purchasing a property with your own funds.

Want to know what these advantages are? Read on, this article will help you understand why it’s a great decision to take a home loan, even if you have sufficient funds to finance the purchase yourself!

The first, and probably one the most important benefits; save taxes!
A home loan gives you certain tax benefits through which you can save a large amount of money. Since the home loans interest rates is what steers people way from this financial instrument, let’s being with section 24B of the Income Tax Act. This section states that your home loans interest rates is allowed as a deduction from your taxable income. You can also add service fees, brokerage, commission, prepayment charge, etc. to increase the deductible amount. In the case of self-occupied homes, you can avail up deductions up Rs. 2, 00, 000, whereas if the loan is to secure a property to rent, there is no limitation on the deduction amount. So if you were worried about the interest rate, don’t, because you stand to get it all back anyways!
That’s not all; the principal repayment also provides you tax deduction, this time under section 80C of the Income Tax Act, 1961. You can avail up to Rs. 1, 50, 000 under the act. Combined, these two tax benefits can help you save a very large amount of money.

Double investment!
When you take a home loan your funds don’t get locked into one investment. This means you have funds lying around which you can in ULIPs, Mutual Funds or any other investment options you deem suitable. At the same time you’ve procured the property as well which will appreciate in value and, if it’s rental, give you a monthly income too! Thus choosing a home loan, even when you have sufficient funds, gives you the opportunity to double your investments.

A home loan can help you have bigger dreams, and help you achieve them too!
Taking a home loan even if you have sufficient funds upfront gives you the keys to homes and properties you could previously only dream about. Because, combine your purchasing power with assistance of a loan and suddenly you can go for options that were out of your reach before.

Save for Emergencies!
If you thought the home loans interest rates was bad, what’s worse is if, God forbid, you find yourself in a financial emergency just after investing your money in a new home or property. But if you take out a home loan, you’ll have back-up money to keep your financial standings steady. Even if you invest the money you can easily liquidate it by paying a surrender charge or something of that sort. Property on the other hand can’t be liquidated so simply. So in case of an emergency, you’ll have funds to cushion your struggles.
So this article explains why you don’t need to worry about home loans interest rates, because you anyways recover them, it shows that you can save large amounts of money through tax benefits, it shows how a home loan can help you dream big and achieve big too and it also show you how a loan can help you in a financial crisis, so if you’re looking to invest in property, go in for a home loan. Speak to financial advisor today!