Buying a new home in Bangalore is like a fairytale come true. Dreams come true but given the high demand and other factors, the realisation is different for each one of us. Buying a home is generally a financial and emotional decision. The home provides us with peace of mind along with social security and a sense of achievement.
Types of Financing to Buy a Home
While you decide on the best place to buy home in Bangalore, you will need to evaluate how you will finance the purchase. There are many ways to buy a home. Some of them are as follows:
- Line of credit
Read on to know more about the pros and cons of each:
Loans vs. Savings
The most popular question is whether to use all our savings and invest in the house or to take loans for the same.
Now, though, savings are preferred because of zero debt but experts suggest that loans are a better idea because of the following:
- Tax Benefits
- No loss of Liquid Assets
- Reasonable Interest Rates
The question though is ever debatable because there are many factors associated with a house as in- the place where you are buying it, is the colony a posh area, is the location a prime location etc.
Considering these factors in mind, experts suggest delaying the buying of home and building a corpus through investments in that time so that the expenses are met without paying more than required for the asset. Usually, when one takes a loan, the person ends up paying more than the amount the person gets after application due to interest rates. The corpus will ensure you pay with the accumulated money which includes registration fees along with the increased prices of the property without going into debts (here, we assume the property rates go high up each year by 5% and you are delaying the buying of property by 10 years)
Home loans continue to be a popular method of financing new homes as the new generation is aspirational and doesn’t want to defer the house purchase to the distant future. There are sufficient financing schemes available from banks and NBFCs which makes the purchase of a home through a loan convenient. The tax breaks offered on the interest payment as well as a part of the principal make the proposition more attractive.
There are different types of mortgages depending on your need and eligibility criteria:
- Lease Rental Discounting: Here the property is leased or rented and the mortgage is given against that property.
- Loan Against Property: Given against properties, the loan requires submitting original papers with the bank till the time the loan is submitted in full.
- Home Loan: These loans are given for homes only. They are granted against a mortgage for buying or building a home.
- Second Mortgage Loan: This means loans on property already under the mortgage. This is also known as a top-up loan. This is given on the basis of borrower’s credit history
- Reverse Mortgage: This is for senior citizens. Here, senior citizens keep their property for mortgage and the bank pays them EMI on a monthly basis. When the senior citizens pass away, their property is sold by the bank- the amount of loan paid to them is deducted and the rest of the amount is paid to their heir.
Line of Credit
Line of credit refers to credit that is fixed and/or extendable depending on the type of line of credit you are going for. Line of credit ensures a set of money to the borrower that can be borrowed as per the needs. They can be paid back and then borrowed again. The lender sets interest rates and other related rules.
Pros of the instrument:
- Borrow the amount that you require. You don’t have to borrow the whole accrued limit.
- Repayment options are flexible
- Interest is accrued only on the amount borrowed not on the whole limit.
- Borrower can get collateral loans at lower rates
- The access to funds is regular
- In unsecured line of credit, you don’t have a need for collaterals
- No restrictions on borrowing till you exhaust your credit limit
- You can always pay back and borrow again
Cons of the instrument:
- An increase in interest rates can lead to an increase in the variable rate on the line of credit
- Maintenance fees is charged even if you don’t use the funds
- Your CIBIL Score must be good to qualify for this
- If you don’t borrow frequently and balance stays high, it can impact your CIBIL Score in the negative.
Once you decide on the method of financing, you can check our Home page to pick out your dream home. Our range will leave you spoilt for choice and you will conclude that it is the best place to buy a home in Bangalore.
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