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How to handle your Home Loans
You are likely to be horrified by the steadily increasing real estate prices. For prospective buyers, taking a loan to fund their home purchase is now an accepted trend.


How much loan you can raise will depend on how far you can match the eligibility criteria of the lenders. But instead of leaving it only to the lender, ask yourself how much should you borrow to buy your dream home. Your borrowing will obviously be dependent on your financial needs and the type of house that you plan to purchase. At the same time, it will also depend upon your existing income, your estimated future earning capacity, your existing debts, investments and saving in hand, number of dependants you have, your age and your personal profile and outlook.

You know, Borrowing is definitely a good strategy for buying a house. How much you borrow is largely dependent on the tax benefits you get due to the borrowing, your existing wealth and the regular cash flows you generate. Tax is a very significant driver on deciding the quantum of your borrowing. The amount of tax you can save by taking a housing loan will depend on the tax bracket you fall into.


Given this background, how much you borrow would depend on case-to-case basis. This is because everybody has a different financial situation and goals.Yet there are common streaks in borrowers like similar age profile, professionals with similar educational qualifications or similar existing liabilities etc. And if you can relate to their profile, you will have some pointers to this questions that are intended to be a starting point.


Say you are young and have just stabilised on your first major job.You may have found a great house, but qualifying for a big enough loan maybe a problem - for the time being. But if you are confident that your disposable income is about to move up substantially in the next few years and you don't foresee any other major liabilities in the near future, as you have age on your side, you may look at a loan offering that takes into account your future income.


Lets look at another personality.You may have a good job and may have found a home you adore. But you have many liabilities or practically nil savings. Maybe you have dependant ailing parents or a child with medical issues to take care of. And this takes a large part of your regular income. Or it may just be that you have been leading a carefree life and already have several loan repayments on hand. Keeping such circumstances in mind, it may make sense for you not to borrow beyond your eligible limits. Prudence suggests that you take a much lower amount of loan than you maybe eligible for.


You know you can easily qualify for the home loan thanks to the huge surplus cash you and your spouse generate regularly. Obviously for you the borrowing amount will be largely driven by the maximum tax benefit you can get. You know there are tax benefits of up to Rs.1.5 lakhs for the interest on borrowed capital. Also the principal repayment of the loan/capital borrowed is eligible for rebate under section 88 of up to Rs.20,000. In the high tax bracket, the interest you pay may turn out to be even negative considering the tax benefits you get."

So Make Your Dream Home.
posted by Joby @ 5:41 PM   0 comments
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