Protect your house from calamities @ just ₹9/month*
Compare and Save
Compare and save up to 28%**
Bank-approved policy copies
Bank-approved policy copies
No paperwork
No paperwork
Instant online policy issuance
Instant online policy issuance

So that we know what to call you.


We'll send your policy copy & important updates to this number.

By clicking on "" you agree to our Privacy Policy & Terms of Use
Get Updates on WhatsApp

Self-Financed Homes: A Guide to the Potential Risks Involved

Having a home of their own is a significant milestone in one's life. However, with the rapidly increasing prices of real estates, it can be complicated to buy a new home or construct their dream home. If you are among the many individuals weighing the options between self-financed homes and home loans, here is a helpful guide that makes it easier to understand the better choice.

Read more

Self-Financing or Home Loan - Which One is Better?

At the time of choosing between the option of self-funding for your home and taking a home loan, the following table will guide you in differentiating between self-financing or home loan:

Basis of Differentiation Self-Financed Home Home Loan
Fund availability When building your home, firstly, you will use all your savings to purchase a home, and then you may miss potential investment opportunity funds. A home loan can leverage your purchasing power, allowing you to buy your dream property that you cannot afford with cash alone.
Tax Benefits No tax benefits are provided when you choose self-financing for your home. Purchasing a home loan can give you tax-saving benefits, especially in the case of interest and principal amount repayment.
Liquidity Tying up your savings to build a home can limit your liquidity, making it harder to access cash in emergencies. Having a home loan provides you with a chance to diversify into other required financial areas.
Benefits of Home Loan Insurance In the unfortunate event of a death or disability, your family members or dependents might have to face difficulties in arranging funds or outstanding expenses that may needed to construct the house. Home loan insurance protects the outstanding loan amount in case of the borrower's death or disability. Hence, it ensures the loan is paid off in case of any emergency without hampering the construction process.
Credit Score There is no credit score checking or paperwork to fill out. Purchase and timely repayment of home loans aid in improving credit scores.

What are Self-Financed Homes?

A self-financed home is created solely with the savings of the future homeowner. Due to the one-time payment of their venture, there is no chance of fund diversification or tax benefits. Although the idea of self-financed homes seems reasonable, multiple risks might hamper all your savings.

Risk of Self-Financed Homes

Some of the most common risks that potential homeowners may face when self-financing for a home are as follows:

  1. Arranging funds

    The first risk you may encounter is arranging funds for the project. With increasing property rates, it might be challenging to accumulate adequate money to begin building a home. Such a step can be disastrous in a sudden emergency within your family.

  2. No tax rebates

    Self-financing means you won't take any loan. You will miss the eligible tax rebate under Section 80C on mortgage interest payments.

  3. Missing out on government schemes

    Another risk directly related to your home's self-financing is you might miss government schemes, which are quite useful & affordable. One of the common the scheme is Pradhan Mantri Awas Yojana. It aims to offer affordable housing loans and launches several schemes. Here, you can avail of the home loan at the interest rate starting at 6.50% p.a. for a tenure of up to 20 years.

  4. Preservation of cash - emergency, investment and other reasons

    Deciding to self-finance your home's construction might seem a good idea. However, it might be risky since no finances are readily available if an emergency strikes. With the help of a home loan, you can keep your savings intact and retain liquidity for other significant investments or unpredictable risks.

  5. Credit scores will not be built

    Finally, a credit score is the most significant risk when self-financing your home. Since you will be paying the builder for the construction of your home directly, there will be no chance of a credit score being created or built. The absence of a credit score may cause some issues in the future when you decide to take a loan for other purposes.

    You may also read 10 Tips to Remember When Buying a Flat

What Not to Miss? Buy Home Insurance Online

Whether you self-finance your home purchase or take out a loan, a home insurance policy is crucial. Buy home insurance online and protect your prized investment against risks such as damages or losses due to natural disasters, fire, theft, etc.

At, you can compare home insurance plans online offered by multiple home insurance companies based on your budget & preferences. Moreover, you can enhance your policy coverage by purchasing add-ons like valuable content cover, PA cover, etc.


A home is a place of comfort, safety and luxury. When going into the real estate market with a plan to buy a house, you must consider the pros and cons of self-financing and home loans. In the case of self-financing, there is a need to stick to the pre-decided budget, which leads to a compromise. On the other hand, taking home loan insurance will provide broader options and allow you to build a credit score for future loans. In all of this, buy home insurance online to protect your investment and provide financial security in case of unforeseen events.

Written By: PolicyBazaar - Updated: 21 February 2024
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Home Insurance Articles
Buying your dream house can be one of your most significant investments in life, for which you might avail of...Read more
21 Sep 2023 by Policybazaar 2986 Views
Housing society insurance is a one-stop solution for all residential societies against unforeseen damage caused by...Read more
14 Feb 2024 by Policybazaar 287 Views
Common Inclusions and Exclusions of Home Insurance Policy In India, several insurance companies are offering various...Read more
05 Apr 2022 by Policybazaar 1531 Views
Owning your dream house is one of the significant milestones in a lifetime. Remember, your home is not merely a...Read more
30 Jan 2024 by Policybazaar 233 Views
Purchasing a home is one of the most financially sound decisions one can make. Any decision taken in a hurry might...Read more
07 Feb 2024 by Policybazaar 220 Views
Housing society insurance is a one-stop solution for all...Read more
14 Feb 2024 by Policybazaar 287 Views
Purchasing a home is one of the most financially sound decisions...Read more
07 Feb 2024 by Policybazaar 220 Views
Owning your dream house is one of the significant milestones in...Read more
30 Jan 2024 by Policybazaar 233 Views
Getting home insurance is like giving your house a financial...Read more
05 Jan 2024 by Policybazaar 225 Views
Buying your dream house can be one of your most significant...Read more
21 Sep 2023 by Policybazaar 2986 Views

Reviews & Ratings

4.4 / 5 (Based on 120 Reviews)
(Showing Newest 10 reviews)
Bokaro, July 26, 2022
Coverage for natural calamity
I was looking for an insurance policy that provides me coverage for natural calamity. Since my house is located near a river and it floods my area in the rainy season. So i went on the Policybazaar website and particularly look for this coverage found the exact plan that provides this coverage.
Bilaspur, July 26, 2022
Premium Calculation
I was looking for a home insurance policy online. I stumblled upon the Policybazaar website and it is one of the best online platforms to purchase home insurance policy. I learned about the insurance plan i wanted to purchase and after choosing the plan and add ons i could calculate the premium using their online premium calculator. Thanks Policybazaar.
Bikaner, July 26, 2022
Natural Calamity cover
I have recently purchased a flat and wanted to cover it with a home insurance policy. I was aware of the Policybazaar website so i thought i should give it a try. I went on their website and as i wanted to cover my flat with a natural calamity cover specifically i searched for it and without wasting a minute it showed me the natural calamity coverage.
Amritsar, July 26, 2022
Enough coverage
I was looking for a home insurance plan online. I was fed up as i have to visit different websites to look for a single suitable insurance plan. However, i stumbbled upon Policybazaar website where i was able to find the right insurance plan that could provide me enough coverage.
Bareilly, July 26, 2022
Nice customer service
I wanted to purchase a home insurance policy and a friend of mine suggested to purchase it from Policybazaar. I bought the policy and after that i had a confusion regarding exclusions so i called up Policybazaar customer care and they cleared out the confusion and i loved their customer service.
Ajmer, July 26, 2022
Qiuck claim
I purchased a home insurance policy recently. However, due to a natural calamity, my house was damaged as the pressure of the water because of flood broke the enterance door of my house. But the insurance plan that i bought got me covered and i as able to get the quickest claim possible.
Delhi, July 26, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension free now.
Kolkata, July 26, 2022
Wide coverage
The home insurance plan that i purchased from policybazaar's website is a great plan that provides me coverage for not only the structure but also cover several expensive content of the home such as paintings, mobile phones, laptops, television, etc.
Ahmedabad, July 26, 2022
Suitable insurance plan
I purchased the group health insurance policy from Policybazaar website. First of all, i did not have to wander much online while lookig for a home insurance plan that fits my requirement and i found the suitbale home insurance plan by comparing different plans on the website.
Amritsar, June 09, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension-free now.
  • Disclaimers+

    #Savings of 28% are based on the comparison between the highest and lowest premiums for a pucca building with sum insured of >₹ 1 crore at Delhi, for property age less than 5 years and policy term of 11 years.