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Home loan vs self payment

abhishek (Staff) (81 Points)

11 October 2012

HI,

I live in Delhi and am planning to buy a house in Noida, can buy the house by self payment.

Would like to know should I buy pay by self or there are any benefits of taking home loan.

Thanks in Advance....

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7 Replies

(Guest)

IF YOU TAKE LOAN THE INTEREST YOU ARE PAYING CAN BE CLAIMED AS LOSS FROM HOUSE PROPERTY.FOR PRINCIPAL REPAYMENT YOU GET A DEDUCTION.IN MY OPINION IT WILL BE BETTER TO TAKE A LOAN

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abhishek (Staff) (81 Points)
Replied 12 October 2012

Can you tell me any calculation to check if in all how can I save better.

Investing money in FD and taking home loan with tax benefit OR pay directly instead of investing in FD.

CA.Vinita Gupta (Deputy Manager- Finance) (2923 Points)
Replied 13 October 2012

If you have sufficient funds why take a Loan and increase you tension. There is an Interest of 10% to 11% on home loan depending upon the Banks. So why pay Interest unnecessarily to get 80C deduction?

As per my opinion do not take loan if you have funds in hand

CA Saiyum khan (Practicing CA) (690 Points)
Replied 13 October 2012

Agreed with CA Vinita. One should never think of loan if having the sufficient fund. You would be making negative saving for sure if you are depositing your own fund as FD and buying Home on taking Loan even after taking in to consideration tax benefits.

Yet you may do some tax planning for claiming the tax benefits after considering your own earnings and earnings of your close relatives like your wife, mother, father, parents etc.

(Guest)

if you want to invest the money in fd then it would be of no use so use ur money to buy house

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Sanyam Sultania (BCom, CA) (127 Points)
Replied 13 October 2012

Dear Abhishek,

Taking home loan or not, is your option. We can only provide you with the suggestions.

Suggestion 1: If you are a person who can take risks, then please dont buy a house using your own funds. Find a place to invest at a rate more than the home loan rate and enjoy the difference. For eg:, invest in mutual funds, earn returns, pay interest on home loan and enjoy the difference.

Pro's : You have an oppurtunity to earn extra money, and your savings increases & as well you get some tax exemptions.

Con's : Its quite a risky suggestion, there are chances of negative earning,in case you investments dont give you the required income.

Sugggestion 2: Invest using your own fund and relax.

Pro's: There are no chances of you having any tension, peace of mind guarented.

Con's: No oppurtunity of earnng extra money, other than increase in realty rates.

Please dont make tax exemption as a deciding factor in whether to take a loan or not. Anyways for your informations, you can get relief in 2 places:

1) Interest deduction of Maximum Rs 150,000 in Income from House Property. f i assume this will be your only property, then you can deduct, max 150,000 from your salary before paying tax.

2) Principal repayment of home loan will be allowed as a deduction under sec 80C. You can take this deduction against salary as well.

By seeing your other post, i came to know that you already have investments, if you think you can earn more from these investments than housing rate loan, go ahead with suggestion 1, else suggestion 2.

Regards

Sanyam Sultania

Sonu Kumar (Account Manager) (665 Points)
Replied 20 October 2012

I think Taking Loan will be Better Option... Because Interest Deduction up to 1.5 lakh and Deduction Under Section 80 c Upto 1 Lakh is Availabe..... and Invest your Money for More Profit