When in need of financial backup, a mortgage loan could be the best way to go. It is a type of loan that is offered based on the value of your property. In simple words, the borrower has to keep his/her asset or property as collateral with the lender for a specific period in exchange for funds and the money received can then be used for any purpose. This sure keeps the borrower from depleting all the savings at once and he/she can gradually repay the amount in installments over the chosen loan tenor.
6 Ways a Mortgage Loan Enhances Financial Stability
Consider the following benefits of a house mortgage loan when looking for financial stability –
1. High-Value Loan Amount
A mortgage loan typically offers a high-value loan amount, starting at INR 25 Lakhs and going up to INR 5 Crores. Such a huge amount certainly takes away a great financial burden off the shoulder. Whether the goal is to finance your child’s higher education, a grand wedding in the family, an exotic vacation, or unforeseen medical expenses – one can rest assured that a house mortgage loan has it all covered.
2. Affordable Interest Rates
As mentioned already, mortgage loan interest rates start low, typically ranging from 8.25% to 15%, depending on the type of interest chosen i.e. whether it’s a fixed rate of interest or floating (variable/adjustable) rate of interest. While a fixed rate of interest means the rate of interest will remain unchanged throughout the loan tenor, a floating rate of interest implies that the rates are subject to change periodically throughout the tenor as per the market trends.
3. Flexible Repayment Tenor
Unlike a personal loan, a house mortgage loan tenor extends up to 18 years. With such a flexible repayment schedule, the monthly EMIs automatically get reduced and it becomes easier for the borrower to plan their monthly dues. Furthermore, a mortgage loan EMI calculator makes the whole process of evaluating EMIs simpler. The borrower can simply enter the chosen loan amount, tenor and rate of interest to get an estimate of the monthly installments. Remember, the longer the loan tenor, the shorter the EMIs.
4. Balance Transfer
Another smart way of reducing interest rate and ensuring financial stability with a mortgage loan is to opt for a balance transfer facility. A balance transfer allows the borrower to transfer the outstanding loan amount to another lender for better, cheaper mortgage loan interest rates. Thus, one could be saving a considerable amount on the rate of interest paid.
5. Loan-to-Value Ratio
A mortgage loan has a higher Loan-to-Value ratio, typically ranging between 75-90%. It is a measure that compares the amount of the mortgage with the appraised property value. Based on the value of the property, the lender determines what percentage of the property value they will be lending to the borrower. This considers several factors, like the age, location, and overall condition of the property. For instance, a newly constructed property with all modern amenities located at a prime location will have a greater LTV than an old property situated in a congested, shabby locality. This can be highly beneficial for safeguarding the borrower’s savings.
6. Tax Exemptions
One of the best ways a mortgage loan ensures financial stability is by offering income tax benefits to borrowers. As per Income Tax Act Sections 24(b) and 37(1), the interest paid on property loans is exempted from tax if the borrowed amount is used for business purposes or purchasing a house, respectively. Thus, opting for a house mortgage loan is a great way to secure your hard-earned money and enjoy tax benefits.