Home loans are a popular choice for middle-income individuals looking to purchase their dream homes. However, many wonder if it is wise to take out a loan when there are sufficient funds available for buying a house. This question has troubled several prospective homebuyers. The decision to take a home loan or utilize more of one’s own money depends on financial circumstances, age, other financial obligations, and the purpose of the home purchase (investment or primary residence).
Home Loan : There are many advantages to buying a house without using a home loan. These include reduced total costs because there is no interest to pay, as well as avoiding the paperwork associated with bank loans and the stress of paying EMIs. However, not taking a home loan also has its disadvantages, such as missing out on tax benefits.
According to a report, buying a home without a home loan can reduce the overall cost, but it should not be done at the cost of your retirement or emergency fund. There are other benefits of taking a home loan that should be considered. For example, for self-occupied properties financed by a home loan, you can claim deductions under Section 80C of the Income Tax Act and on the interest component of your home loan EMI.
Paying your home loan on time can also improve your credit score and increase your creditworthiness. Home loans are often considered one of the cheapest forms of debt. However, real estate investments have historically given lower returns than other investments such as stocks and bonds. If someone has enough money to buy a home, he may end up investing most of his savings in a single asset and limit his ability to diversify his investment portfolio.
You should know that you should not put all your eggs in one basket when investing. Even if you have the financial capability to buy a property without a loan, it is important to carefully assess how this money will be best used. There may be other investment options that offer higher returns in the long run.
If someone has enough funds so that their liquidity is not affected even after investing in a home, they should consider buying a home without a home loan. However, if doing so will cut into retirement or emergency funds, taking a home loan may be a better option. It is important to assess your financial situation and long-term investment strategies before making any decision.
