Advantage Of Buying A House In EMI System With Nick Statman
According to Nick Statman, the most prominent benefit of having an EMI home loan is that one can buy a house at a much lower price than the actual cost of the house in the market.
An EMI or equated monthly installment system enables you to borrow money to buy a house and pay back the borrowed sum along with an interest in a fixed monthly sum for a long number of years, up to 15-30. This makes purchasing a house cheaper and possible even if you are unable to come up with the full cash amount. Now, let us see how it is advantageous to purchase a house on EMI with Nick Statman.
Lower Initial Payment
According to Nick Statman, the most prominent benefit of having an EMI home loan is that one can buy a house at a much lower price than the actual cost of the house in the market. A small initial deposit of 10-20% of the total cost is required as a down payment. The remaining part is through monthly EMIs spanning several years of the vehicle’s useful life. This lower initial capital requirement helps make home ownership accessible to many more people.
Pay Over Time
Since you provide for your home slowly by making steady payments over a long time, the EMI amounts are less, even on a low-income month. EMIs can be as low as 10% to 40% of the gross take-home income depending on the income, amount borrowed, term and tenure, etc. To reduce the burden, the payments are spread over 15 to 30 years.
Tax Savings
The entire home loan EMI you pay involves principal and interest portions. This can even lead to massive yearly tax deductions that can directly affect your overall net annual expense. You also get to enjoy tax advantages for as long a period as the life of the structure due to the long duration that a company takes to repay the loan.
Appreciating Asset
Nicholas Statman says that in the long run, property prices have a way of rising over time, more so in the long run. But even as you gradually clear off your home loans, the fundamental value of the house may be rising. This is particularly beneficial for you in the sense that while you own an appreciating asset, you also get to enjoy the tax benefits on your EMIs.
Forced Savings
When one chooses to pay through an EMI system, you are disciplined to pay monthly installments for a certain amount. This helps you make habitual savings for an asset that you eventually possess after the loan period is over. Few citizens would have the self-discipline and commitment to save money to purchase a home without a mortgage on their own.
Conclusion
According to Nick Statman, purchasing a home is a huge risk, but with EMI, it is not so because it eases your wallet by minimizing the first cash outlay, decreasing monthly payments, and providing tax benefits. Remember to consider your ability to pay back before taking a large loan with many years to reclaim the money. However, if an individual is careful about the plan of taking an EMI home loan, then it can turn out to be a good option.