Self-financing or Home Loan?
This is a question that haunts all home buyers for a
month or two before one makes the buying decision. The right option depends on
various factors, but it’s good to know the benefits of either, so that one can
take an informed decision.
Benefits of Self-financing
No Eligibility screening: Financial Institutions
screen applicants on various parameters such as credit history, income profile,
history of IT Returns filing etc to reject or accept applications.
No need to pay interest: Depending on the fin.
Institution concerned, the down payment made, and the term of the loan
concerned, one may end up paying twice the actual price of the property over
its entire tenure in case of a home loan.
Better Negotiating Power: Self-financing is preferred
by Builders which means, one can look at better sft rates for the same property,
as against going through a home loan.
Peace of Mind: Defaulting on home loan EMIs can be a
stressful affair for lot of people, not to mention the loss of
credit-worthiness, and inability to raise credit during an emergency.
Benefits of Home Loan
No need to raise large capital: People in the salaried
class who have negligible savings, large commitments, inability to raise
personal loans, high affordability for paying EMIs, are ideally suited to go in
for a home loan.
Appreciation makes up for interest: The heartache that comes from paying steep interest is made up by the fact that appreciation of the property over time will help you recover the excess amount paid on the property by virtue of a home loan.
Tax Benefits on Principal, Interest: Section 24(b) of
the (Indian) Income Tax Act, 1961 allows for a deduction up to Rs. 1.5 lakh
towards the total interest payable, while Section 80C & 80CCE allow for a
deduction of up to Rs. 1 lakh on the principal amount.
Inculcates Financial Discipline: In addition to
creating an asset for the future, paying EMIs every month for a long term
inculcates financial discipline in a person which goes a long way in making
him/her financially stable.
Whether one is buying a home for investment or living
purpose, the financing decision must be made after carefully considering one’s
age, liabilities, assets, health, working lifespan, family profile etc. These
will decide whether self-financing, or a home loan, is a better option.
For more details please contact our experts by visiting our website www.mahaveergroup.in or drop in to our office.
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