Since the wake of the 21st century, the organised housing finance sector has become one of the most significant lending sectors of the finance market. In its initial years, it recorded a compounded growth rate of 30%. Rapid urbanisation and a heavy concentration of rural demography shifting to urban areas prompted the growth of housing loans in India.
Such achieved an estimated high growth rates are based on factors including improvement of credit infrastructure, larger availability of measures for easy home loan repayment, lower home loan rates, government schemes such as PMAY, etc. If both the HFCs and borrowers can capitalise on the current advantages respectively offered to them, India would see a larger penetration of loans and convenience.
How to save money on home loans?
There are several avenues which the government and the financing companies have made available to borrowers to reduce their loan obligation. These are –
- Down Payment
When you avail a home loan, the financer does not provide the entire value as a loan. Instead, it provides a major percentage of the property value as the loan while you need to pay the remaining portion as a down payment.
The loan quantum in such an instance depends on 2 factors – loan-to-value ratio and the amount you can afford to pay as a down payment. If you can pay a larger sum as down payment during home loan online apply, then your loan obligation would be marginally reduced.
- Repayment Tenor
Repayment tenor of your housing loan directly decides your payable EMIs. If you choose a longer tenor, the resultant EMI amount would be lower and vice versa. Similarly, when you choose a longer tenor, the repayment sum would be comparatively higher due to a prolonged interest calculation and vice versa. Henceforth, use an EMI calculator before applying for a home loan to calculate EMIs for different tenors. Ascertain which tenor would sit ideal for you as per your financial affordability.
Certain financial institutions, such as the Bajaj Housing Finance Limited also provide home loan offers for further convenience of borrowers. For instance, pre-approved offers on home loans are provided by financiers to reduce loan processing time and enhance convenience during loan application. These offers apply to a host of loan options such as home loans, business loans, personal loans, etc. You can provide your name and phone number to check your pre-approved offers.
- Part-Prepayment
You can decide to part prepay a larger sum than you are obligated to during loan repayment. Top financial institutions do not levy any charges on part prepayment to help borrowers better mitigate their loans. Part prepayments directly reduce the remaining loan principal and help a borrower avoid interest charges applicable on the borrower. It is one of the ways to reduce home loan tenor and EMI.
- Tax Benefits
You are entitled to 3 different home loan tax benefits on home loan repayments if you are a first-time homebuyer and 2 tax exemptions otherwise.
Any home loan borrower can avail an exemption towards the annual principal repayment on a home loan of up to Rs.1.5 lakh u/s 80C.
A borrower can also avail an exemption of up to Rs.2 lakh on his/her annual interest repayment u/s 24(b).
If you are a first-time homebuyer, you can avail an additional exemption of up to Rs.1.5 lakh on home loan interest u/s 80EEA for loans availed. This is all you need to know about saving taxes when you take a home loan.
You can also transfer your balance during housing loan repayment for more financial savings. There are certain things which you need to keep track of when you perform a home loan balance transfer.
In the past few years, the sector noted a fall back due to inconvenient measures which discouraged borrowers and real estate investors alike, displaying a shift away from housing loans. However, a slew of measures adopted by the government in the current Financial Year has nudged the growth rate of housing loans back on track.
As a borrower, it is important to refer to a leading lender while availing a home loan and applying only after proper planning the finances. Also, you should know how to claim applicable tax exemptions to reduce the financial burden.
