From tax rebates to various other benefits, much has been written about the plus points of taking a home loan. Just like a coin having two sides, taking a home loan has some downsides too.
It’s a long-term commitment
Usually, a home loan is a payment you have to commit for about 20 years. And life has its ups and downs. If there is a sharp rise in your salary, you can consider paying a lump sum amount to clear off the loan easily. However, if there is an unforeseen situation where you are not able to pay the EMIs, it will bring on a huge liability.
You pay more than the actual price of the property
Picture this, you have invested in a property worth Rs 50 Lakhs in Bangalore in 2014. You took a home loan for Rs 40 Lakh for the same property. In the year 2020 you want to sell it off for Rs 70 Lakh – and earn a profit. However, when you do the actual math, you will find that you have not benefited. This is because when you take a home loan, there is an interest involved and you will find that you have already paid interest of more than 20 Lakh.
Interest rate woes
One of the most crucial decisions you have to take when you are looking for a home loan is whether you have to opt for a fixed rate home loan or floating rate home loan. This is because the interest rates keep varying over a long period.
In simple English, Opportunity Cost is defined as the cost or value of the next best alternative not selected. And when it comes to real estate, it is true that the ROI is much lower when compared to other asset class of investment. This is mainly because the loan tenure is for a longer period.
Having said all this, it is ideal to weigh in the pros too before investing in a property. At Fortius Infra, we will guide you with the right decision. Feel free to give us a call. https://www.fortiuswaterscape.com/