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The biggest question while buying a house is whether to pay the entire amount yourself or take a home loan. Both options affect your savings, cash and future plans. The right decision is the one which balances both your financial condition and mental peace.
New Delhi. Buying a home is one of the biggest financial decisions of life. During this time, the most important question is whether to invest the entire amount yourself or take a home loan and pay in installments. Home loan gives you the facility of repayment through EMI over a long period, whereas in self-funding you have to pay the money in lump sum without taking any loan. Both options have their own advantages and limitations, which impact your savings, cash and future plans.
What are the benefits of taking a home loan?
The biggest advantage of taking a home loan is that your entire savings do not get stuck in one place. Along with buying a house, you can also invest your capital in other investment options. Moreover, tax exemption on home loans is a big attraction. Tax relief is available under Section 80C on the principal amount and Section 24(b) on the interest. Paying EMIs on time also improves your credit score, which helps in taking other loans in future. Long tenure and comparatively low interest rates make EMIs easier for salaried people to manage.
When is self funding option right?
If you have enough cash or liquid assets and want to stay away from debt, self-funding can be a good option. With this, you do not have to pay interest for a long time and you get your full rights on the house immediately. This method gives peace of mind for retired people or investors with fixed income. However, investing your entire savings in property may reduce your liquidity. Therefore, it is important to keep an emergency fund of at least 6 to 12 months before buying a house.
Why is it wise to balance
Often the best approach is a balance of these two options. For example, you can make a down payment of 40–50 percent of the property price and take a home loan for the remaining amount. This reduces both the loan burden and the total interest, and you also retain cash. This method gives you financial security in uncertain circumstances and also keeps other investment opportunities open.
What things should you pay attention to while taking a decision
The choice of home loan or self funding depends on your risk tolerance, regular income and financial goals. If you can comfortably repay the EMIs, then the tax and liquidity benefits of a home loan may come in handy. At the same time, if you want a stable life without debt, then self-funding may be better. The right decision is one that keeps you financially secure and does not turn the joy of becoming a home owner into stress.
