My Finance Mitra

Steps to Avail a Home Loan with a Lower Interest Rate

1. Check and Improve Your Credit Score
   1. A credit score above 750 enhances your chances of getting a lower interest rate.
   1. Pay off outstanding dues, avoid late payments, and keep credit utilization low.
2. Compare Loan Offers
   1. Research different lenders, including banks and housing finance companies (HFCs).
   1. Use online loan comparison tools to find competitive interest rates.
3. Choose the Right Loan Type
   1. Fixed-rate loans: The interest rate remains constant; suitable if rates are expected to rise.
   1. Floating-rate loans: Interest rates change with market conditions; ideal if rates are expected to fall.
4. Negotiate with the Lender
   1. Lenders may be willing to offer lower rates to borrowers with strong financial profiles.
5. Opt for a Shorter Loan Tenure
   1. Shorter tenures generally come with lower interest rates and save on overall interest outgo.
6. Consider Special Offers
   1. Look for festive discounts, promotional schemes, or special interest rates for women borrowers.
7. Make a Higher Down Payment
   1. A higher down payment reduces the loan amount, improving your chances of a lower rate.
8. Check Eligibility for Subsidies
   1. If you are eligible for government schemes like PMAY (Pradhan Mantri Awas Yojana), you may benefit from interest subsidies.
9. Maintain Stable Income and Employment
   1. A steady income and job history instill confidence in lenders, increasing your chances of better terms.
10. Use a Co-Borrower
    1. Adding a co-borrower with a strong credit profile can help secure lower rates.

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Tax Savings on Home Loan

1. Section 80C: Principal Repayment
   1. Claim up to ₹1.5 lakh on the principal repayment of the home loan.
   1. Only applicable if the property is not sold within 5 years of possession.
2. Section 24(b): Interest Payment
   1. Deduction of up to ₹2 lakh on interest paid for self-occupied property.
   1. For rented or deemed-to-be-rented properties, there’s no cap, but the total loss from house property is limited to ₹2 lakh per annum.
3. Section 80EE: First-Time Homebuyers
   1. Additional deduction of up to ₹50,000 on interest, subject to specific conditions:
      1. Loan sanctioned between April 1, 2016, and March 31, 2017.
      1. Loan amount ≤ ₹35 lakh and property value ≤ ₹50 lakh.
4. Section 80EEA: Affordable Housing
   1. Additional deduction of up to ₹1.5 lakh for first-time homebuyers under affordable housing (loan sanctioned between April 1, 2019, and March 31, 2022).
   1. The stamp duty value of the property must be ≤ ₹45 lakh.
5. Joint Loans for Maximizing Deductions
   1. If the loan is taken jointly, both borrowers can claim tax benefits individually, doubling the deductions (up to the limits mentioned).
6. Pre-EMI Interest
   1. Interest paid before possession can be deducted in 5 equal installments. The deduction starts in the year of possession (under Section 24).
7. HRA and Home Loan Benefits
   1. If you live in a rented house, you can claim both HRA. If you have a home loan, you can also claim home loan deductions.

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Tips to Maximize Benefits

• Timely Loan Repayment: Avoid penalties and maintain eligibility for tax benefits.
• Document Maintenance: Keep loan statements, interest certificates, and property documents for tax filing.
• Consult a Tax Advisor: For complex cases, seek professional help to optimize savings.

By following these steps and leveraging tax benefits effectively, you can reduce the overall cost of your home loan.