As someone who is planning to buy a home using a home loan, the first thoughts would be to avail 100% financing for the purchase. Even though the possibilities of such expectations coming true are very rare (the RBI and NHB - National Housing Bank prohibits any lender - bank or NBFC from offering 100% financing to any borrower applying for a home loan), the cons of availing 100% financing through housing loan have more cons than pros. To understand it better, let’s take a look at few of the cons of applying for 100% financing from housing loans.
No/ Insignificant Profits on Resale: Since the resale value of your property is highly subject to the registration value of your house (which doesn’t include the interest paid towards the loan or the other charges levied by the lender), chances of acquiring profits (if the house is bought on 100% financing through home loan) on resale of the property goes incredibly down.
Double the Cost: Given most housing loans are taken for an average of at least 20 years, a 100% financing can obligate the loan subscriber to pay exactly double or more than double the actual cost of the house even if the loan is availed at the lowest rates in the market.
No Tax Rebate if You aren’t a First-timer: The tax rebates and the PMAY subsidy which most buyers plan on utilizing to make their purchase more convenient are available only for first-time home buyers. Hence, a 100% financing housing loan will soon become a burden you are not a first-time buyer and you lack a proper repayment plan.
Bottom Line: There are different ways to plan for a new home loan. However, there isn’t ‘a one size fits all.’ One must take into consideration different aspects and needs out of the real estate property and accordingly define going about with their home loans.
No/ Insignificant Profits on Resale: Since the resale value of your property is highly subject to the registration value of your house (which doesn’t include the interest paid towards the loan or the other charges levied by the lender), chances of acquiring profits (if the house is bought on 100% financing through home loan) on resale of the property goes incredibly down.
Double the Cost: Given most housing loans are taken for an average of at least 20 years, a 100% financing can obligate the loan subscriber to pay exactly double or more than double the actual cost of the house even if the loan is availed at the lowest rates in the market.
No Tax Rebate if You aren’t a First-timer: The tax rebates and the PMAY subsidy which most buyers plan on utilizing to make their purchase more convenient are available only for first-time home buyers. Hence, a 100% financing housing loan will soon become a burden you are not a first-time buyer and you lack a proper repayment plan.
Bottom Line: There are different ways to plan for a new home loan. However, there isn’t ‘a one size fits all.’ One must take into consideration different aspects and needs out of the real estate property and accordingly define going about with their home loans.
Reference Read: 100% Financing a Good Idea? Know the Pros & Cons
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