The best way to finance your property investments

Posted by Anurag Mishra on July 17th, 2017

Investing in property is a trend as old as time. For years people have thought of property as a safe and financially sound investment. And if you have too decided to invest in property and fixed on a piece of real estate or house you like, the puck inevitably stops at finding the finance to purchase this property. But there is one simple solution to the finance dilemma; it is to take a property loan. This article will explain why a property loan is one of the best ways to finance your investment in real estate.

Firstly, the down payment is very less:
With property loans, the bank or financial institute will foot up to 80% or 90% of the total amount required to purchase a piece of real estate or property, leaving you to pay only the remaining 10 to 20 percent of the amount. This means ownership will be yours with a considerably smaller initial payment. On the other hand, saving money to buy property would take years and probably by the time you’ve saved enough the property value would have increased considerably.

Lower Interest Rate:
The interest rates on home loans vary between 8.35% and 12%, which is quite low. Considering the inflation rate and the way property is appreciating year after year, it’s financially more viable to pay the interest now than to pay highly exuberant rates for the same property 10 years from now. Another point with the interest rates is that they are subject to market performance and government policies, meaning they could drop considerably over the term of your loan. And while the interest rates drop, the value of your investment only goes up. Take for example the people who took out home loans in 1995 at 18%, not only did the interest fall by more than 9%  in the next decade, the value of property in India also boomed at the same time.

Tax saving benefits:
Interest rates normally scare people away, but this cost can actual pay dividends through saving on the income tax you pay. Under Section 24(b) of the Income Tax Act, 1961, you can avail tax deductions of up to Rs 1.5 lakh against the total interest you pay on a property loan for purchase or construction of a house property. Not only that, under section 80C of the Indian Income Tax Act, 1961, you can also avail tax deductions of up to 1 lakh on the principal repayment. That’s one lakh deducted every year from your taxable income over the entire tenure of your loan.

These are just the benefits of the property loan. But say you rent out the property you’ve invested in, you can use that amount to pay your EMIs, this means your investment is literally helping you pay the loan amount back. And of course, once the loan tenure is over the property should have appreciated considerably. So if you’re thinking of investing in a property and you don’t have nearly enough money up front, it’s a smart move to go in for a property loan. Speak to an agent or visit online aggregator sites today and see how a loan can help achieve your dream investment goals.

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Anurag Mishra

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Anurag Mishra
Joined: December 13th, 2016
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