ATM :: Home loan is a convenience, not a bad debt!

SUKANYA KUMAR Founder & Director, | Jan 27, 2015, 10.55 AM IST |
Home loan is a cheap source of money to buy a house which generally appreciates in value in long term. Mortgages come with additional benefits such as tax benefits, access to more funds and offer opportunity to manage one’s money matters better.


There is a huge sense of achievement in buying your own home. Even more so today with the skyrocketing property prices, a home purchase is truly a great accomplishment in all aspects. Some home buyers may even be lucky enough to consider buying a home without a mortgage, but even if you can afford it, it may still be an intelligent decision to opt for a mortgage. Stumped?! Its true. A mortgage is a liability that even financial wizards would approve of. It should not be looked as a mere debt, but a tool of convenience.

Many home buyers may look to over-stretch their financial capability in the aim of buying a property without a mortgage, but a home loan can actually come with its own advantages. Today, the smart borrower can reap multiple benefits from a great home loan product. The best reason to opt for a mortgage is that it’s comparatively the cheapest form of credit available. What the point of forgoing a cheap form of credit, and then, taking expensive personal loans, car loans, or using credit cards to meet your financial requirements? A cheap form of credit also enables a greater monthly cash flow for you and your family, and if this money is invested well, you could even beat you own home loan interest rate in returns!

Everyone buys a home with the view that it will increase in value over time. If they felt otherwise, they would just rent! If history is a good indicator, your home’s appreciation, in most cases, will surpass the amount of interest you end up paying over the home loan tenure. Some home buyers may avoid a home loan as it comes with a monthly cash burden, but they don’t realize that overtime your disposable income will increase. The EMIs that may seem like a big chunk of your monthly take home will actually get easier to pay with time. Buying a home outright is similar to locking up the funds in your locker when you can use the funds by opting for a home loan. These extra funds can be invested to create even more wealth for you and your family.

Finally if these reasons were not enough, a home loan can help you save a significant amount of tax. The last budget raised the deduction against interest on home loan payment from the old Rs. 1.5 lacs to Rs. 2.0 lacs. In real terms, this will enable taxpayer to save an additional Rs. 15,450 on their tax liability. With the increase in the deduction in interest rate, the borrower is actually ends up setting off a portion of the interest paid in turn, having an even lesser interest component on the mortgage.

These benefits demonstrate how home loans are actually convenient rather than the belief that they are a debt, and should be avoided. Today, borrowers are in an envious position as lenders fight hard to increase their market share. This means that prospective borrowers have access to great home loan products, terms, and in most case, even other benefits such as over-draft or top-up to allow the borrower to have access to even more funds. These facilities can be used for any reason during the tenure of the home loan. Understanding all the products to choose the best one can help a borrower to come out in a greatly advantageous position. Here, it would be wise to consult a home loan advisor to ensure that the home loan product you choose is the best for you, and you know how to use the other facilities of the mortgage for your best interests.

In conclusion, a home loan is good debt. It is the cheapest form of credit available, can help you to have a great cash flow and create further wealth for your family, and is a tool to help save tax! Further, it is an investment, which appreciates in value from the day you buy it as opposed to other purchases such as gadgets and mobiles, which go down in value the day you buy them; this is a fantastic reason why buying a home is a great decision. When investing into a home, buyers should not shy away or avoid a mortgage, but instead embrace it. Moreover, with all the options available the borrower should take time in choosing the best option, and to be safe, consult experts for advice. A mortgage can provide a substantially greater liquidity and financial flexibility, and is truly a tool of financial convenience!

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