Buying property is perhaps one of the most important decisions that you will ever make in life. This decision also requires careful consideration of a number of factors. But before you make the decision of buying a house, you need to understand whether you want to buy a house or opt to rent.
Typically buying a house means a bigger commitment. It keeps you tied down to one place for many years. You need to pay the EMI for years and you will not be able to move for the next few years. If this sounds off-putting, then maybe you are not ready to buy a house. But if you are ready to make the commitment, let’s discuss the financing- is it wise to buy a real estate property on loan?
It is obvious that a property is a huge financial investment, and many people do not have enough funds to pay the amount entirely from their own pocket. In such cases, you might opt for a home loan in such situations. If you are still not sure whether you want to opt for a home loan to buy plots in Mannivakkam, then we will compare the benefits of a home loan and cash payment.
Locking Up Your Funds
There is no doubt that property investment is a big investment. When you buy a house or invest in property, you lock in a lot of money. According to the expert opinion, even if you can manage to pay the entire amount of money, it is better to apply for a home loan. The best thing you can do is to pay a lump sum amount in the form of a down payment and divide the remaining amount in the form of monthly EMIs. This will ease the pressure on a home loan to a great extent.
High-interest rates and tenures will not stress you out and you will still be able to afford the loan. The sum of money that remains with you can be used in reinvesting. By availing the home loan, you will not put all your eggs in a basket and risk losing all your money in a catastrophe. In fact, you will be able to get higher returns from your investments by putting your money in stocks, various mutual funds or even bonds. This will not only distribute your investments and give you better returns, but also create a diverse portfolio.
You Can Always Benefit From Some Extra Money
No one has ever not benefited from some extra cash. When you take the decision of buying a luxury apartment in Chennai or a plot in Mannivakkam, you must consider any financial emergency. It could be anything like loss of job, health-related emergency or even a divorce which has the possibility of hampering the in-flow of cash. Hence, instead of putting all your life’s hard-earned money and savings into buying a house, opt for an emergency fund. This emergency fund is also helpful in paying your EMIs. Therefore, a home loan is a better option in comparison to spending all your savings and investing it in one single property.
Opting For a Loan Improves Your Credit Worthiness
While your bank or money lending institution will take into consideration your credit score, by taking up a loan your creditworthiness also increases. By paying your EMIs on time and paying off the loan, your credit scores will improve. This works in a cyclic manner as the next time you apply for a loan, your previous scores will show your creditworthiness.
Tax Benefits
As per Section 80C of the Income Tax Act, when you get a home loan, you are also eligible for tax deductions that can go up to Rs. 150,000 per annum on the original loan amount. This amount can go up to Rs. 200,000 on the interest amount of your home loan.
Now that we have discussed the positive aspects of home loans, let us take a look at some of the drawbacks of home loans.
Before buying a plot in Mannivakkam, you need to estimate Mannivakkam land value– the principal amount and the rate of interest will help you understand how much you are actually paying for the property.
Long term commitment
A home loan is a long term commitment. In most cases, home loans tenure is somewhere around 20 to 30 years which makes it a huge financial burden for any homeowner.
Value Of Property
The real estate market is volatile and it is always fluctuating. Hence, if you are not an expert in the market, you might end up investing in property whose value will depreciate instead of appreciating. This can turn out to be a huge financial setback.
Death Or Separation Or Divorce
In cases where a property is jointly owned by two people, like spouses, a divorce can turn out to be a huge financial burden for one owner of property in case your spouse refuses to pay his or her share of EMIs after the divorce. The best way to avoid this situation is to have a clear discussion regarding the finances before agreeing to co-owner any property. On the death of a spouse, a similar situation can be seen where the survivor bears the burden of EMIs and repayment.
Bottom Line:
Investing in real estate is a big decision. There are many factors that dictate one’s decisions. Hence, you need to understand all the implications of investment in real estate before investing in a property. We hope this blog provides you with a clear idea about home loans and whether it is the best option for you.
