5 Hacks for First Time Home Loan Buyers in India

Did you know that among different kinds of loans available in India, home loans offer the longest repayment tenure of up to 25 years or more? This reduces the burden of your EMIs. Home loans can be obtained for both new and resale property investments. With the economy and the property market having suffered due the 2020 pandemic, this could be a good time to check out new home loans. In fact, you can also obtain home loans to renovate your existing residence, boosting its resale value. To maximise the benefits of these loans, here are the top five tips for first-time home loan seekers.

5 Home Loan Tips for First-Time Buyers in India

1. Check your eligibility for the Pradhan Mantri Awas Yojana

As a new home buyer, you might be eligible for the PMAY if you fall under any of the below categories:

  • Economically Weaker Section, with an annual family income within 3,00,000
  • Lower Income Group, with an annual family income of ₹3,00,000-₹6,00,000
  • Middle Income GroupI, with an annual family income of ₹6,00,000-₹12,00,000
  • Middle Income Group-II, with an annual family income of ₹12,00,000-₹18,00,000

You can calculate the subsidy available to you under the scheme using the PMAY subsidy calculator, based on your loan amount and the interest rate.

2. Avail tax benefits on home loans

The government of India offers tax exemption on both the interest charged on and the principal of new home loans. So, in a financial year, you can claim deductions of up to ₹1,50,000 under Section 80C of the Income Tax Act of India and up to ₹2,00,000 on the interest paid, under Section 24B of the Income Tax Act. You can also seek tax exemptions for loans taken to complete house construction. Co-owners and co-applicants can also claim the deductions individually.

3. Choose the Right Lender

If you take a home loan from a friend/relative, you can claim tax deductions only on the interest charged on your loan but not on the principal repayment, under Section 80C. But a bank loan makes you eligible for tax benefits on both the principal and interest paid. You can also use the home loan EMI calculator, available on the bank’s website, to verify the equated monthly instalments for your loan.

4. Extend your home loan eligibility

Go through the home loan eligibility criteria of your specific lender and try to increase the eligibility and/or loan amount by:

  • Clearing any existing loans
  • Opting for step-up home loans
  • Having regular rental income
  • Improving your CIBIL score with regular loan and credit card activities

5. Check your repayment capacity

Decide the loan value as per your repayment capacity. Ensure that your EMI is within 40% of the net received salary. This is important, since you need to still fulfil your other financial obligations, besides repaying the loan. You can also get insurance coverage equal to your loan amount. This can ensure that in case of your sudden demise, your legal successors can continue to reside in your home, before the repayment of the loan is completed. In-depth knowledge of home loan facilities and benefits can help you make an informed decision for your first-time home buying experience.

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