Table of Contents
- Home loan tax savings in 2020
- Choose a bank with low interest rates
- Avail of the benefit under the Pradhan Minister Awas Yojana (PMAY)
- Think before buying a home loan insurance from the lender
- Beware of the spread on your home loan interest
- Negotiate with the builder or property seller
- Explore under-construction properties
Buying a house involves significant financial expenditure. Consequently, a little planning and effort can help you to save lots of money, when you buy a home in 2020.
Home loan tax savings in 2020
When buying a home, consider opting for a home loan for the tax-saving advantages that it offers. Besides the home loan principal component, the interest on a home loan is also tax-deductible. “Having a woman co-applicant as the first borrower, can bring down the amount of interest you pay. Also, if both the spouses are working and apply for a loan jointly, the total loan amount eligibility increases. Moreover, both the co-applicants can claim tax deductions of up to Rs 1.5 lakhs each, against the principal repaid, under Section 80C. Both can also claim up to Rs 2 lakhs each, against the interest paid, under Section 24b,” explains Navin Chandani, chief business development officer, BankBazaar.com.
Choose a bank with low interest rates
It has become increasingly easy to avail of a home loan today, with almost every bank offering competitive rates and attractive offers. However, it is important to conduct due diligence and choose the bank with the lowest interest rate. According to experts, many banks offer reduced interest rates for female borrowers. This can vary from 0.01% to 0.15%. While this looks like a small percentage, home loans tenures are usually in the range of 15-25 years and small differences can add up to substantial savings. For example, a difference of 0.05% on a Rs 50-lakh loan for 15 years can save you approximately Rs 27,000.
Avail of the benefit under the Pradhan Minister Awas Yojana (PMAY)
The Pradhan Mantri Awas Yojana (PMAY) was launched, to help citizens to avail of homes at subsidised rates. Provided that one meets the criteria laid down by the government, the PMAY is a great way for first-time home buyers to save money. Under the PMAY Credit-Linked Subsidy Scheme (CLSS), first home buyers can get interest subsidy benefits of up to Rs 2.67 lakhs against the home loan, for buying affordable homes. So, if you are looking to buy your first home in 2020, then, the CLSS benefits can save you lots of money.
Think before buying a home loan insurance from the lender
“When opting for a home loan through a bank, always remember that there is no obligation to purchase an insurance cover at the same time. Neither the law or the RBI or IRDAI have made it mandatory for the same. Purchasing insurance is always at the sole discretion of the buyer and one cannot be forced to buy a plan. One can always purchase insurance at a later stage, through any insurance company,” explains Rahul Grover, CEO of SECCPL. A home loan insurance policy that is bundled with your home loan, generally involves a single premium and you will not be able to port your insurance, if you wish to switch your lender.
Beware of the spread on your home loan interest
The interest rates and spread on the loan, vary from bank to bank and often between different schemes offered by the same bank. Unless specifically mentioned in the agreement, the spread is a key factor, as it usually does not change over the tenure of the loan, unlike the interest, which is volatile and would change at periodic intervals, to reflect the changes in repo rates and market conditions. Hence, borrowers should select the lender with the lowest spread, as the market forces and regulatory policies would bring interest rates at par eventually. However, the spread would remain constant.
Negotiate with the builder or property seller
Do not accept the first offer from a realtor or a developer. Always enquire about other options, best possible rates, furnishings and amenities that will be provided. However, bear in mind that the figure you quote should be reasonable. Otherwise, the property may slip away from your reach.
Explore under-construction properties
While the lure of having a home that is ready to move in might sound attractive, these properties are more expensive. If you can afford to wait, buying a house that is still under construction or one that needs finishing work, will be a better option, financially. While purchasing an under-construction home, check the RERA registration and record of the developer. Preferably, choose properties in projects where the developer has taken title insurance.