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Points to Consider When You opt for a Home Loan

Nov 11, 2019 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

Mr. Chandra wanted to own a house right from the time he started working. However, he couldn’t save enough every month to purchase a home from his money. So, he thinks of opting for a home loan.  He compares various options and chooses a bank that offers the least interest rate.

However, a home loan is not just about the interest. There is more to it than what meets the eye. In the current scenario in India, many banks are cutting their interest rates to encourage homebuyers. Hence, you should tread carefully, when you are looking for a housing loan. Here are some tips for the same:

Check your credit score

A credit score is a number that is assigned for your credibility or creditworthiness. It ranges from 300 to 800. Home loans are easily available if you have a good credit score, that is 750 and above. A person with a good score is one who has a clear financial history and hasn’t defaulted/missed out on any repayments of loans or credit cards. Before opting for a housing loan, it is imperative that you check your credit score to assess your creditworthiness.  Loans of applicants with a score of 600 and below, are usually rejected by lenders.

Know about the different interest rates

Currently, there are two different housing loan interest rates in the real estate industry, the base rate and the MCLR (Marginal Cost of Funds Based Lending Rate). While the base rate has been in existence for many decades, the MCLR has been introduced by banks in 2016. As a home-loan applicant, it is very important for you to understand these rates and their differences. This will give you a clear idea about the total EMI that you need to pay towards repaying your loan.  

Opt for a term insurance

If you want to take up a housing loan, you should opt for a good insurance policy as well. The term insurance policy provides you and your family enough coverage in the event of an unfortunate disaster. If you are the sole bread-winner of your family, you should buy insurance that will take care of your home loan repayment as well, thereby, reducing the financial burden of your family. Aegon Life’s term insurance plans are designed to provide maximum coverage at affordable premiums.  

Know about the tax benefits

There are many tax deductions available for home loans under Sections 24, 80C and 80EE. You are also eligible for a tax deduction of up to Rs.2 lakhs for the interest that you repay for self-occupied property. First-time housing loan applicants are also applicable for an additional deduction of Rs. 50,000 for repaying interest. For principal repayments, Section 80C gives you deductions for a maximum amount of Rs.15 lakhs.

Purpose of loan

Before opting for a housing loan, we would advise you to give some thought for the same. Since home loan rates are dependent on the social and economic growth of a country, it is important to have clarity on your loan requirements. Having a clear purpose will guide you to take the right decision about applying for the loan. If you are going to buy and stay in your new home, there has never been a better time than now for availing a loan. However, if it is only for investment purposes, you may want to defer your decision, because real estate prices are due for market corrections in the near future.

When you opt for a home loan, you should also take into the risk factor of repayment, in the event of an unfortunate incident. Therefore, it is important to cover your home loan repayment with good term insurance plans. To know about Aegon Life’s life insurance products, visit our home page.


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