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Pros and Cons of Home Loans

Everyone wants to own their own home; big or small your own roof above your head is every single person’s dream. But people dream about owning a beautiful home and not being obligated to a huge loan, home loan. But let us face it, it is highly difficult to own a home without a home loan.

Thus home loan being inevitable part making that dream of your own home come true, let us see the pros and cons of a home loan, though it does seem irrelevant.

Cons

  • Expensive: It is a known fact that home loans cost a lot. But you will be surprised to know the amount that you actually pay as interest. The interest that you pay for your home loan over the loan tenure will almost be more than half of the principal amount that you actually borrowed.
  • Huge Commitment: With a home loan, you are bound to years or decades of commitment. If your loan tenure is 20 and 25 years, it means that you will be spending a significant portion of your life in with the mortgage burden.

Pros

  • Make your dream come true: Without any doubt, home loans definitely help us in making our dream of owning our own home come true. How much ever cash we might have, our dreams are always going to be bigger when it comes to our home. So, this is where home loans come in handy. Whether you have significant savings or very less cash in hand, home loans offer a chance for everyone to own their home.
  • Return trumps interest: Interest rates paid on home loans are very high and can easily be twice that of the principal. Still, the appreciation of the property over the years also increases significantly. So, if you hold on to your property for long, the value of your property will outweigh the interest amount.
  • Savings: Home loans are a way to regular savings. This comes in handy for those who find it hard to make regular contribution towards savings. With regular repayments we build up equity; the difference between the original loan amount that was borrowed for home loan and the actual value of the property. This equity is a form of savings.
  • Tax benefit: The Indian government has always encouraged citizens to invest in property/ home. Hence home loan is eligible for tax deduction under section 80C. There are other tax benefits as well such as deduction for interest paid on the loan, deduction in interest during pre-construction period, deduction for first time home buyer etc.

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