Just 3 decades back, people in India was not aware of anything called as home loan. In that era our parents and grandparents used to buy a home during the time of their retirement when they have accumulated the enough wealth. But today because of the easy availability of the home loans, many people have started buying home on home loans in the first few years of their active earning life.
Pros of buying home on home loan.
Because of Income Tax Benefits on Home Loans in India it is advisable to buy home on home loans. Under Section 80C, you can get tax deductions up to Rs.1 lakh every year on the principal amount paid. Also under Section 24(b), interest component of EMI (Rs.1.5 lakhs) is eligible for deduction from taxable income.
Taking a Joint Home Loan with parents/Siblings or spouse can give you double tax benefits.
Cons of buying home on home loan.
Your first home is not your investment even though the price of real estate goes high, however your second home could be your investment. This is because you are not going to sell your 50 Lakh value home to fund your child’s education but you may have to liquidate your 50 Lakh of Mutual funds portfolio for your child’s education.
If you are going for a home loan considering your home the biggest investment than sorry, you should build wealth first before going for a home loan.
Going for a home loan in your early 20s & 30s is a good financial decision only if you are simultaneously going to build wealth by investing in various asset classes. The TIME that you will spend behind EMIs is never going to come back and during the same time period you could build a great wealth by simply investing that money in Mutual funds via SIP.
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