Tax benefits on your home loan

A person who belongs to service class is always terrorized by the by the income tax that he has to pay, as quite a huge part of what he earns, he has to pay it is a income tax and which is mandatory. So, people are always looking for ways in which they can minimize the amount they require to pay as income tax.

People who are planning to borrow a home loan may also be worried about would they be able to cope up with both income tax as well as home loan that they are planning to borrow. So, here is good news for such people. A person who has borrowed home loans is entitled to avail tax benefits on the interest paid up to Rs. 1, 50,000 for a financial year.

If a home loan is jointly borrowed then both the borrowers are entitled to avail separate tax benefits, resulting in an increase in the amount of tax deductions but the deductions can be availed only when the payment was made, if a borrower was unable to make payment then he can not avail tax benefits on the same.

In case the home loan was borrowed jointly then the tax benefits are to be shared in the same proportion as they share the in home loan. The tax benefits are still applicable if the borrower refinances his loan for the first time but if the borrower wants to borrow another loan to repay his loan for the third time then he is not eligible to enjoy tax benefits.

In order to claim the tax benefits the borrower requires to present the certificate clearly showing split between the principal and the interest rate in the EMIs paid during the year issued by the housing loan company.

What makes home loan expensive?

People borrowing a home loan are always looking for a cheap home loan scheme, without exactly having an idea about what really makes home loan expensive or cheap, so before starting with any things it is important for a borrower to understand more about the factors that can have an impact on the total cost of a loan and what are the necessary expenses which are needed to be taken care of.

When a person applies for a home loan he is required to pay processing fees, which is non-refundable, its extent can vary from bank to bank but most of the bank levies 0.50% of the total loan amount as processing fees. There are various other charges also which a borrower will require to pay but the processing fee is the heftiest one out of them.

The most significant thing in a home loan which affects the cost of home loan most is the interest rate applicable on it. The interest rate offered by the banks can differ as there are a lot of schemes that they offer and out of them they can choose the loan scheme with minimum interest rate or if he has some specific requirements then he must look to get interest rate as low as possible in that category.

However, sometimes a lender can differentiate among various applicants and can offer different interest rates on the same loan scheme. An applicant who fits in well in the eligibility criteria of a lender and most importantly if he possesses a good credit score can avail best interest rate on his loan as compared to others. So, in order to have a lower cost of a loan, it is necessary for the applicant to have a high credit score.

How to prepare platform to borrow home loan?

Home loans are well-known for their complex nature, most of the people who want to borrow a home loan are afraid to do so possibly due to the rumors that float around about the home loans. Not all are rumors, a home loan alone is enough to keep a person occupied and sometimes this things leaves a person baffled as there is so much that can come up all at once.

The thing is that most of the people do not think much while borrowing about which loan scheme would be good for them and how much should they borrow and most importantly are they in a state of borrowing? This is the main reason why some are exploited more as compared to other because the ones who have done the groundwork properly stand best chance with their home loan scheme.

It is very important for a person to be sure about a few things which can really be helpful for the borrower to avoid things that possess potential to turn out ugly. The ground work is really very important for the purpose, which includes a borrower to educate himself about the basics of a home loan; so that he can have a better idea of what is he going to be involved with?

A person must then gather information about the loan schemes available in the market and must underline their basic features and the defects that he realizes and then according to that he must proceed with other things, while categorizing the schemes special consideration must be given to the interest rate offered by the bank.

While doing this he must also get an idea of how much he can borrow and what his requirement is? This is very important aspect pertaining to a home loan as an oversized loan can make the things really very difficult. Also, he must start saving some money to meet the expenses that will be incurred while undergoing the loan procedure and also it can be utilized to meet emergency requirements in the future.

Use your land to pay down payment

A person who finds it difficult to arrange for money to pay the down payment for his home loan can use land to sort things out. It is very much possible to use the land to pay the down payment but there are a few important things that an applicant needs to consider and the most vital out of them is the valuation of the piece of land.

In order to get the real value of the land, the borrower can rely in a builder, they can provide a very precise estimate of the land, also, the applicant needs to provide original title deed in order to authenticate his possession over that land and which is very important.

Sometimes, when both the parties are not able to arrive at a decision regarding the valuation of the land, the lender might ask for some extra amount to be paid in cash. It is also important for a borrower to know that a piece of land where some construction work has already been done is bound to fetch more valuation than the one where nothing like that has been done.

Apart from that, the borrower is required to pay all the expenses related to the loan including the closing costs. So, a person who wants to utilize his land to pay the down payment must consider all these facts first.

Accelerated repayment for home loan can serve the purpose

The hike in the lending rates does not seem to slow down anytime soon and the people who have borrowed home loan under floating interest rate category are the one who are affected the most out of this interest rate hike, despite being aware of the present market situation a few people might want to borrow a loan, but if they want to minimize the impact of hike then they must be very cautious about everything that they do.

A person who has already borrowed a loan must keep an eye on the fluctuation of the interest rates as the lenders are very quick to increase the lending rates bit they do not show this much readiness when it comes to decreasing the loan rates, so is a borrower is aware of such developments then he can immediately ask his lender to decrease the lending rates.

There are a few other things that can be done to tackle the hike in the lending rates, first is that the lender can increase the loan tenure, as a result of it the amount that the borrower has to pay as the monthly installment to his loan will decrease and it would likely come under a limit that where a borrower can find it easy to make monthly payments.

This might assuage the pressure of rate hike to a great extent but the only disadvantage to this option is that as the time duration of the loan would increase the borrower would end up paying more interest on his loan and this can make the loan to cost a little more than it was expected to cost.

The other thing that can be done here is that the borrower can try to repay his loan as soon as possible and hence he can save considerable amount but this option is not open to all the people as it can be difficult for most of them to arrange for a huge sum of amount to pay as installment every month, but it is definitely a better option than increasing the loan tenure.

Enjoy more tax benefits through joint home loan

People belonging service class are always worried about Income tax and any way by which they can save some money is more than they would want. For a moment crossing over to home loans, home loans are hefty; it implies that the borrower has to pay a huge sum of money out of his monthly earning as installments if he has borrowed a loan. It adds on the pressure on the borrower but people must know that they can earn income tax benefits ion home loans.

A borrower can enjoy tax benefits on the interest component as well as on the principal component but the benefit could be maximum on joint home loan, where more than two people have borrowed the loan are responsible for repaying the loan.

Each of the borrowers can claim a tax rebate of up to 1 lakh for principal repayment and 1.5 lakh for interest payment and more importantly the tax benefits will be dived amongst the co-borrowers in the same proportion as they own the property.

The most essential thing here is that co-owners have jointly borrowed the loan and they need to repay the loan amount in the same proportion in which they own the property. Also it is necessary that the repayment of the loan is made through a joint account owned by the co-borrowers and if it is not possible then it needs to be ensured that the others are also contributing their share.

So, in order to avail maximum tax benefits joint home loan must be preferred.