Home Loan Lending & Housing Loans EMI
You’ve decided to treat yourself with a brand new home. Next comes the stage where you will have to pay for it: either by borrowing a home loan from a bank or a lending agency, or by just splashing your own cash. And just like any other major financial decision you’ve had to make in your life, there are two sides to this coin as well.
Going for cash payment will definitely seem enticing. If you can cough up the money, it will keep you away from the hassles of repayments and home loan EMI’s. There is also a significant psychological boost knowing that you own the house. However, there are some definite pro’s that come into picture if you decide to go for a home loan:
1. Opting for a home loan generally means paying a monthly or a quarterly fee as installment to the bank over a period of time, rather than buying the house with savings. Do you have sufficient funds set aside for your retirement? Do you have sufficient health insurance and life insurance? Paying a large sum of cash to own a property can drastically impact your financial liquidity. The amount you pay the bank in installments is significantly smaller than the cost of the house, and will allow more freedom with your money, in case you need to use it
2. Paying a home loan EMI rather than using up your savings for your home can be critical if you have other responsibilities. This includes having kids whom you need to send to school or college, or have elders in your family whom you need to assist with health and living expenses. Will you be financially stable to cover unseen expenses that may crop up threatening to disrupt your comfortable life?
3. The interest that you pay for a home loan EMI can be an important part of your tax deductions. Paying a housing loan EMI qualifies you for significant tax deductions that buying a home upfront cannot. It may make better sense to have reduced tax deductions, rather than putting all your money into a new home.
4. A few years down the road, or due to a change in your financial situation, you may decide that you need more equity. Will your financial situation change drastically that you may no longer qualify for a home loan lending? It is best to go for a home loan when the banks are ready to offer one, than run behind banks when no one is interested in home loan lending.
5. In case you do have a surplus of funds, you can always invest it in stocks. It is generally considered that investing in stocks is a better deal than investing in a non-movable asset like a home. You can also invest in a small business, which will help you substantially in the long run. This will help you go a step further than breaking even, despite of having to opt for a home loan EMI to pay for your new home.
With all these advantages you have if you go for a home loan, it certainly a better decision to opt for home loan EMI or home loan lending, than pay through your own pocket.