home loans

What is Home Loan? – LegalAdviceOnline

What is Home Loan?

A home loan is an unsecured loan in which the property purchased as collateral for the funds borrowed. A typical home equity loan or HELOC is calculated by comparing current market value of the home with the outstanding mortgage balance.

A home equity loan can be used for any purpose including making home improvements, paying off credit cards, and consolidating debt. In fact, a large number of homeowners are reusing their HELOC every year in order to finance major purchases such as vacation, education, medical bills or even debt consolidation.

In today’s economy, many people are resorting to home loans because they offer significant savings. However, there are disadvantages associated with using a home equity loan like they may not be able to find a suitable lender who will offer competitive rates.

Also, if you are looking for financing to consolidate debt, then a bank statement will prove to be helpful. Home loans are available from most banks but some banks offer a better rate and some also offer a home equity line of credit (HELOC).

Some of the advantages of home loans are that they are easier to obtain than personal loans. Another advantage is that you don’t have to leave your home to apply for this loan as it is not a requirement to have a bank account to avail home loans.

The interest rates offered for these type of loans are usually quite low and can be less expensive than a traditional mortgage. Interest rates and fees will vary depending on the lender and borrower so it is best to compare various home equity lines of credit available to determine the best and most cost-effective option.

Can I Get Home Loan For Buying Old House?

Many people, who are interested to buy a new house often wonder – how do I get a home loan for buying an old house? When you plan to buy an old house, it is important to understand its pros and cons first. This is the only way you will be able to understand the requirements of buying an old house.

You should know that there are many things that you need to consider before going for it. You should have a clear idea about the reason why you need to buy old house before planning to go for it. People often find themselves regretting their decision once they go through all these factors.

There are many options available when you are looking forward to buy an old house. One of the options is to borrow money from a financial institution or a bank and re-mortgage the old house. This option is good when you are prepared to invest money.

However, the interest rates are high when you take this route. Another option is to buy an old unit when you are moving forward with your life plans and you do not need the additional comfort.

There are various types of home improvement loans available in the market. You can get one for renovating the house or for any other purpose. You can even get one if you have some unused assets in your home and no need to use it now.

Whatever the reason may be, the bottom line is that you can get home loan for buying old houses. It is just a matter of proper research. You can also consult the professionals for better guidance.

Benefits Of Home Loans

The principal and interest paid on Home Loan are taxable as per Income Tax. But in case of first time Home Buyer Property, the payment of principal and interest are not taxable as such. Hence the principal amount is treated as ordinary income and the interest as a deduction, and the principal amount of home loans is deductible on income tax. There are various other advantages of home loans tax reduction:

The principal amount for home loan can be deducted as tax deduction allowed only in certain financial years. Few of such financial years are medium term loans, residential energy efficient buildings, and low and moderate income communities.

The tax deduction allowed in financial year is not available in the first year of home ownership if the borrower is a non-residential community. Also, the interest paid on loans paid during financial year must be at least 5% of the equity value of the property.

The second most important thing that helps you in taking the advantage of tax deduction in home buyers house property is that the house must be your principal residence. The second house must not have any attached apartment, hotel or other similar buildings.

The house must be your principal residence and you need to prove that. All the relevant documents are required for the above mentioned tax deduction.

Disadvantages Of Home Loans

Disadvantages Of Home Loan do not arise when you buy a dream home on loan. Instead it is more of a disadvantage when you want to finance big projects like building a commercial building or renovating your home.

In fact Home Loan comes as blessing in disguise for that section of society which are unable to qualify for a loan. Buying a home on Home Loan is also a big financial choice and every financial move comes with its own set of benefits and disadvantages.

Depending upon the current market value of your planned project, you may have to repay your home loans in form of monthly installments. It depends upon your repayment capacity and how much you want to stretch your money.

However Home Loan has a lot of disadvantages and one of them is that it becomes difficult to qualify for Home Loan if your credit score is less than the required level. Your credit score of yours may be bad or good according to your records but this does not matter much while applying for home loans on home loan.

Even if you have a bad credit score but you can still qualify for home loans on easy terms as there are many lenders who offer unsecured home loans and even secured ones too.

Home Loan comes as boon for those people who have a very tight budget. Even if you have a low fixed income and a huge project at your head, you can easily buy a home on home loan and repay the same over a period of time. However you have to be aware of few key disadvantages of Home Loan such as high interest rate, emis and repayment schedule.

Also Read

What Is A Car Loan?

What Is Equity?

Conclusions Of Home Loans

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