Advantages of Going for a Housing Loan

For the vast majority of people, it’s impossible to buy a home without a mortgage. Buying a home is a big step. It is a source of anxiety, frustration — and a huge sense of accomplishment. With the zooming property rates, it is difficult a buy a home through our savings entirely. Almost all of us have to avail a home loan.

Usually, a home loan is one of the biggest liabilities. Considering the huge amount and the long tenure involved, however your home loan also offers you some benefits.

Getting hundreds of thousands of Rupees together to put down as one lump sum is a privilege reserved for very few.

As it stands, it’s as much as most home buyers can do to scrape together a deposit. The rest has to be borrowed from a bank or building society.  Fortunately, there are hundreds of lenders offering a whole range of different types of mortgages.  Whether you are buying your first home, re mortgaging or moving up the property ladder, there should be a home loan suitable for you

This is a pretty wide question! It all depends on your circumstances and your reason for asking.

1. You are looking to buy a home,

2. You could pay cash.

So why should you get a loan instead of paying cash? How much cash do you have? A home is not like other investments. It is’t liquid, you can’t sell it in a couple of days and regenerate the cash if you need it. If the home is 400K and you have 400K cash then it would be foolish to tie up all of your cash in a non-liquid investment. But if you have 600K in cash then that leaves you with 200K. Enough of a cushion. In fact, you could use some of that cushion to buy another house, with a loan of course…

So let’s say you have 600K in cash and the home is selling for 400K. Interest rates at the moment are still incredibly low, less than 4%, and with tax deduction on the interest it’s even lower. So if you borrow the money for less than 4%, can you use that money and get a better return by investing it elsewhere? If the answer is yes, then it makes sense financially. But of course you will now have a monthly mortgage payment. Will you have sufficient income for the foreseeable future to make that monthly payment? Of course if you only have 200K cash and you want a 600K home then you will have to get a loan!

Buying a home is one of the biggest financial investments you may make in your lifetime; and that’s not just because of the sentimental value. The sum that most of us sink into our home does make it the largest component of our investment portfolio!