subject: Home Loans: Why should we go for it [print this page] Home Loans: Why should we go for it Home Loans: Why should we go for it
Every one dreams about owning a house. Your biggest hurdle in fulfilling this dream is getting a proper finance. Even if you have full finance available at your disposal, it is advisable to get a finance/mortgage for your purchase. We will explore pros and cons of getting a proper finance for your property buying.
Your own finance - It is always not possible to save enough to buy home when you wish to have one. By the time you have enough savings, the prices might have skyrocketed beyond your reach. Or you may reach old age which beats the purpose of owning a home by yourself.
Free Money - Loans are like free money. Believe me. When you consider the inflation factor, you will end up paying less than what you have borrowed. In long terms, the interest factor of the loan will cancel out with the inflation. That is the reason why most banks have not become a Google or Microsoft eventhough they lend huge money to others. Nowadays, most of the western countries are keeping their interest rate near zero percentage to fight off the recession.
Risk Factor - Real estate is always a risky investement. The price fluctuates with the market conditions. Nobody wants to invest all of his hard earned money into a riskier asset like that. As a thumb rule, your real estate values should be around 20% to 30% of your total asset value. When you have a mortgaged house, you can always opt for rescheduling of loan payement thereby keeping the cash out flow as per your changed circumstances.
Tax Benefits - Many countries, including India, offers tax benefits on your EMI. This will greatly reduces the tax burden on you. Instead of paying government, it is always advisable to pay the money for your comfort and lifestyle.
Better Oppertunity - Because of the low interest rate on home mortgages, you can divert your earnings to better investments which will give you better returns.
Considering the above points, it is always advisable to opt for a home loan to purchase your dream home even if you have money to buy it.
