Ever since the lockdown, housing loan interest rate has been falling, with the Reserve Bank of India routing for deeper cuts in policy rates for economy revival. After the budget 2022, RBI retained its repo rate in its monetary policy review. As of now, it has retained the same rates for the 10th time to render continual support amid the after-effects of the COVID-19 pandemic. The move to keep the policy rates unaltered has left a positive mark on demands for home loans. Low home loan rates have resulted in overall loan cost reduction, and now current and prospective home loan buyers require paying extremely less for the same loan than what they paid earlier. However, as most lenders offer floating interest rates, which is linked to repo rate, the low home loan rates are unlikely to remain the same the entire loan tenure.
It is widely expected that repo rate has reached its bottom and might witness an uptick. Any uptick in repo rate will increase the home loan rate, which is likely to increase the loan cost. Thus, while now is a good time to borrow at the rock bottom interest rate and gain most from the low-rate scenario, remember that this will not continue throughout the repayment tenure. Hence, home loan interest rate must not be your only lookout before you apply for home loan. Mentioned here are other crucial reasons to avail home loan.
Longer repayment tenure
Repayment tenure of home loan can usually go up to 20 years. As a result, EMI payments are affordable, which permits you to close your loan without any problem. You can take the help of an online home loan EMI calculator to know the loan repayment tenure according to your repayment capacity.
Simple eligibility criteria
Eligibility criteria of home loan is simple than other credit options. It is basically because the loan is secured in nature. Self-employed and salaried individuals both with a strong credit score can simply apply for this financial instrument. Also, ensure that to be eligible for home loan, you must meet the monthly income parameter set by the lender. Additionally, you must keep certain home loan documents handy before you apply for a home loan.
Government initiated CLSS
Next reason for home loans to gain popularity is the provision of CLSS (credit linked subsidy scheme) by the Indian Government. CLSS makes owning a home affordable for the middle-class section. Additionally, the Indian government provides CLSS not just to the middle-class group but even to the other groups of society like the lowest income group (LIG), economically weaker section(EWS), scheduled caste (SC), scheduled tribe (ST), older adults and women.
Income tax benefit
Last and important reason behind availing home loans is provision of income tax benefits. As per the benefit, you can claim tax deduction on home loan principal repayments and interest component. Additionally, you can avail the same benefits on your registration charge and stamp duty levied on the property.
Ending note
Besides knowing why you must opt for a home loan, you must also know how to bring down your home loan interest rate. This can be done in 2 major ways. Firstly, by maintaining a high credit score. A higher score of 750 and above creates lenders’ trust on you, which makes them offer you a lower rate. And secondly by offering a higher down payment. Putting a higher down payment lowers lenders’ credit risk concerning you, thus resulting in them offering you a lower home loan rate.
