Home loan – Can it be a Wealth Creation tool
Buying a home is must these days. Most people try to buy a home whenever they have cash. With property prices moving northwards a lot of people try to invest in a home.
But the bigger question is can we create an asset out of Home loan.
Yes it can be a tool if its your second home where as first home will be an asset but very unlikely that customers in India will sell this if required.
- Property prices – The asset you buy out of Home loan ie Home – Prices increase. In last 10 years in India the prices of Homes have increased by 3-4 more times, thus making a very valueable asset.
- Saving tax– There is a Tax rebate for home loan thus adding more sense to buy a Home via financed by a Bank.
Home loan tax benefit is divided into two
- One is the tax rebate that you get of RS 1 Lac which is based on payment of principal paid back in an year and is covered in 80 c. If you haven’t made any investments in Life insurance, ppf account and have this, you don’t need to.
- The second benefit is interest paid on the Home loan-Under Sec 24 one can save 1.5 lacs as interest paid on home loan from income tax.
So if your income is above 5-6 lacs a year you can save tax of 75k each year while availing a home loan.
So in nutshell – your asset price increase-Save on income Tax and thus help in creating a long term asset and it is a perfect wealth creation tool.