In my 27 years of real estate consulting, I have seen almost 93% of my clients avail a home loan to fund their home purchase. Since most home purchases are beyond the budget of home buyers, they use home loans to bridge the gap between their funding and the total cost of the home they are buying.
But what if I tell you that many home buyers still opt for home loans even if they have spare funds to buy the dream home. Yes that’s true. In today’s scenario buyers prefer taking a home loan to fund such purchase. And here is my insight into why these clients prefer taking a home loan.
You get your due diligence done –
All the banks get a rigorous due diligence done for any property that’s funded by them. This due diligence process consists of checking the title of the property, vetting of all the legal documents till date, find out if there are any encumbrances or existing mortgage on the said property and if the current owner has a clear and marketable title to the property.
- You get a valuation done –
Ascertaining the true market value of any property is tricky and best left to professional valuers. Your housing finance company gets your property valued for you at no cost to you. Isn’t that wonderful? You have access to the exact value of the property you are buying and you get it for free.
- You have spare money to invest in high pay off investments –
Home loan interest rates are the lowest amongst all category of loans that a bank has to offer. Now imagine this – You have surplus funds of ₹ 3 Crores and instead of using it to fund your new 3 bedroom home at Borivali, you take a home loan of ₹ 3 Crore and buy that swanky new home. And with this surplus of ₹ 3 Crores, you buy an office at Andheri East. This new office will fetch you a rent of at least ₹ 1,25,000/- per month, which helps you pay off part of your home EMI. Cheap home loans help you leverage your money better and create more assets for you. The only downside is you have to be careful with where you invest your hard-earned money.
- You can grow your business with your funds –
Instead of locking up your valuable capital in buying a new home or upgrading to a bigger home, you can take a home loan and use your funds to expand your business or scale up your operations across the country. Your business gives you the highest ROI and it never makes sense to fund home purchases when you have a huge need of capital to grow your company.
- Loan against Property is your emergency fund generator –
Want funds to renovate your home or have an unexpected expense come up? Top up loans in form of loan against property (your home) can surely come to your rescue. Your asset can always get you liquidity in terms of funds, whenever you need it. But don’t get tempted to take a top up loan and indulge in speculative stock market investments. It may seem lucrative, but it’s not allowed as per the lending norms and you run the risk of losing your capital in the volatile markets. So be very prudent in taking loan against property also known as top up loans.
- You get tax breaks –
Yes that’s right. You get income tax rebates on the interest paid on your home loan and also the principal repaid.
Home loans can become your asset instead of a long term liability if you leverage money in a prudent manner and this can create assets for your future as well.