Choosing between home loans or employing your personal capital in real estate could be a question of a massive hit or miss. As per the laws of financial management, there are several factors which might affect your buying pattern and your mode of payment whether through a bank loan or your own pocket. Here we enlist all the possible factors which may affect that decision-making for either of the arguments:

Local Interest Rates

The rates prevailing in your local surroundings for borrowing capital could be considered a prime factor in determining this dilemma. The markets where the interest is less than 5% p.a. it is totally recommended to go for a home loan and invest your capital elsewhere to yield better returns. For the markets, like India, where borrowing capital is an expensive affair, it gets slightly more complicated.

In such cases, compare which bank gives you the best rates and read the fine print to get well-versed with the terms and conditions. You may also look into having a combination of 50 - 50 or 60 - 40 ratio (or anything else based on your discretion) of home loan to personal capital to maximise your financial stability.

Financial Risk

In volatile economies, prices of realty could appreciate or depreciate in a matter of a few days. To save your hard earned monies from such ill-scenarios, consider taking a bank loan. In turn, you may seek to invest your capital somewhere more stable, be it mutual funds or some other safer commodity.

Government Policies & Tax Implications

Governments come up with encouraging policies to stir up the market with the help of central banks and taxation, often on a yearly basis. The central banks may compel the public banks to increase or decrease the rate of interest depending on the market fluctuation, while the governments offer certain tax-reliefs provided you invest in a particular manner. Currently, Indians can avail tax-reliefs against the interest they pay towards home loans. Also, the Pradhan Mantri Awas Yojna is a scheme where it promotes the marginalised masses to benefit from subsidised rate when buying your first home.

One should always be vigilant enough in keeping an open eye for these policies and tax information. On this note, we can recommend taking a home loan, especially under PMAY.

Property Inflation Rate

This denotes that the rate by which the properties get dearer in a market determine whether you should your own money or not. In a market where the property prices are stagnant, it is pointless to invest your money because it won't appreciate its value. On the same, taking an expensive loan in a similar situation won't leave you better off either as you would be paying a lot for something which has a stagnant worth.

Your Own Income

Lastly, but of one the fundamental factors is your personal income. You shall not take a loan against your credit-worthiness, the last thing you may want is to be debt-ridden. If your personal income has a steady appreciation between 15 - 25% p.a. you may look into taking a home loan. If it is more than that, a home loan is a safe game.

With these pointers, mere the financial fundamentals are highlighted. Every individual is believed to have a situation different from others. Please consider all the factors and seek a professional's advice for best results.