How to Use Your Funds and Home Loan to Buy the Property
Sep 18, 2019 Home Loan
Purchasing property needs a lot of careful consideration and expertise. Some of us are lucky enough to understand all the pros and cons and how to make the right investment. However, for some, professional guidance is required. For some buyers, the investment in real estate is only to save taxes.
The government is offering low-interest record rates and tax benefits now, and it is the right time for the home buyers to make a move and purchase the property. These are not the only reasons why one should buy the property.
We discuss every monetary benefit that one should know about before investing in real estate:
The basic rule one should follow are:
The government is offering low-interest record rates and tax benefits now, and it is the right time for the home buyers to make a move and purchase the property. These are not the only reasons why one should buy the property.
We discuss every monetary benefit that one should know about before investing in real estate:
The basic rule one should follow are:
- If the interest gained on deposits is higher than the interest paid on a home loan, then take the home loan.
- If the interest earned on the deposit is lower than the interest paid for the home loan, then use your funds.
- Lets us consider an example, if you are paying 8 percent on your interest rate while getting the same interest in your deposit, then it makes sense to take the loan.
Calculate your tax gains:
Calculate the interest income, i.e., the income you earn from your FDs after paying the taxes.
Calculate the total interest you have to pay on your home loan.
Calculate the tax benefit you will receive on the interest paid on your home loan.
You have opted for the loan below Rs 45 lacs then you are eligible to the claim the tax benefit up to Rs 3.5 lacs. For an amount higher than Rs 45 lacs, you can claim a deduction of Rs 2 lacs.
Calculate the net benefit of taking the home loan by evaluating e total tax benefit you would enjoy on the interest payment during the entire tenure.
Example, if you take the home loan of Rs 35 lacs for 20 years, then the net interest paid is 50.18 lacs. However, if you are investing the same amount of money into the FD them after 20 years, the maturity value will be 1.23 crores.
Homebuyers need to understand that compounding the interest received for parking the funds in FD will create a huge difference. The total FD return after 20 years will amount to a significant money inflow compared to the loan one will take and pay the interest plus principal amount back.
You have opted for the loan below Rs 45 lacs then you are eligible to the claim the tax benefit up to Rs 3.5 lacs. For an amount higher than Rs 45 lacs, you can claim a deduction of Rs 2 lacs.
Calculate the net benefit of taking the home loan by evaluating e total tax benefit you would enjoy on the interest payment during the entire tenure.
Example, if you take the home loan of Rs 35 lacs for 20 years, then the net interest paid is 50.18 lacs. However, if you are investing the same amount of money into the FD them after 20 years, the maturity value will be 1.23 crores.
Homebuyers need to understand that compounding the interest received for parking the funds in FD will create a huge difference. The total FD return after 20 years will amount to a significant money inflow compared to the loan one will take and pay the interest plus principal amount back.
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