By Admin 
Buying a house is considered to be the biggest financial decision of any person’s life. Not only does it involve a huge amount of money, it also requires long planning, proper timing and financial understanding. In today’s time, due to easy availability of home loans, the decision whether to buy a house by paying the full amount or by taking a loan has become even more confusing. This question becomes more important amid the continuously increasing property prices in India. In such a situation, let us tell you today whether you should buy a house by making full payment or take a loan for it and what is the better option among these two.
Why is it important to compare investment and loan?
Financial experts say that while buying a house, it is not enough to just see whether you have enough money or not. The real question is where that money is invested and how much return it is giving. If your savings are invested in a place where you are getting around 15 percent annual return and home loan is available at around 9 percent interest rate, then it may be a wiser decision to buy a house by getting it financed. But if the return on investment is low and the interest on loan is high then full payment becomes a better option.
Advantages and disadvantages of buying a house with savings
advantages
The biggest advantage of buying a house through savings is that you do not have to pay any interest. In the long run, the interest amount on the loan can sometimes be more than the actual price of the house. Whereas paying in cash makes the whole process faster, one does not have to wait for any bank approval and the deal gets completed quickly. Apart from this, one gets mental peace by being free from the worry of EMI. Such buyers, if needed, can sell the property without the permission of any bank and they also get more bargaining leverage in the resale market.
Loss
Investing your entire savings in a single property can weaken your financial security. In case of any emergency, lack of cash can increase the problem. Apart from this, if this money is invested in any other investment option then perhaps it can give more returns than the home loan interest. Also, you do not get the benefit of income tax exemption on buying a house in cash.
Advantages and disadvantages of buying a house by taking home loan
advantages
When taking a home loan from a bank or finance company, all the documents related to the property are thoroughly scrutinized. This ensures that the property is legally protected and there is no possibility of any dispute or fraud. This facility has to be ensured by the buyer himself when he buys a house in cash. On taking a home loan, there is tax exemption on interest and principal amount under Section 24 and 80C of Income Tax. This reduces the total tax burden. At the same time, by taking a loan, the savings remain safe which can be invested elsewhere to earn better returns. Also, paying EMI on time improves credit score, which increases financial options in future.
Loss
Home loan is a long term commitment, which lasts for many years. Over time, the total payment due to interest can be much more than the price of the property. If for some reason the EMI is not paid on time, the bank can also take possession of the property. Apart from this, there is a risk of not getting loan approval. In such a situation, the decision of whether to buy a house in cash or take a home loan depends on each person’s financial condition, income, savings and future plans.
Also read- How can you withdraw PF money to build a house, how much amount can be withdrawn