Home Loans
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With increasing urbanization and higher earnings of the family as a unit, more and more people are opting for home loans to buy their dream home. Especially, first time home buyers are considering it as one of the best options due to their easy availability.

A home loan is generally categorized into two parts: short term and long term.  While a short-term loan last for only up to 5 years and one can easily become debt free is they have better finances, on the other hand, a long-term home loan can be for 5 to 30 years or more and one can opt for these loans if they have fixed finances.

Many borrowers feel that opting for a short-term loan is a good option, but on the contrary, they have many implications. So it’s better to go for a longer one and hence they are the best bet.  Let’s take a look at some of the advantages of opting the second one:

Eligibility for higher loan

With long-term home loans, one has more chances to get higher amount sanctioned as compared to short term. In case of shorter ones, one has to pay higher EMI; on the other hand with less EMI and more sanctioned loan amount, one can buy a much bigger and better house with more features.

Payment flexibility

A prepayment facility on sanctioned loan amount is one of the best options available in long-term home loans. Home loan took for a shorter time not comes with such choices. Long-term loans come with a floating rate of interest, so if you want to prepay your outstanding amount or some part of the loan, then you must go for a longer one.  Moreover, you can debt –free yourself earlier, while retaining the flexibility of making payments according to your finances.

Benefits in Income Tax

The Tax benefits on a home loan are governed under different sections of income tax act and the borrower can claim them as tax deductions while filing a tax return.

According to a tax expert, “Section 24b of the Income Tax Act, provides benefits on the interest payment on home loans. The effective home loan rate of interest, after taking into account the tax benefit, is better than what one can earn on any other alternative investment avenue.” So, one can avail benefits of tax rebate for a longer time if the tenure of payment is long.

On the other hand, Section 80C allows for a deduction of up to Rs 1.50 lakhs, for repayment of the principal component of a home loan. So, the principal component, in the home loan repayment, will be higher for a shorter tenure, as compared to a longer-duration home loan. Apart from this, you will not be able to claim deduction on larger sanctioned amount unless you can take a long-term home loan.

So with all such advantages, long-term home loans are definitely the best and safe bet.