Popular Types of Home Loan You Must Know
You are only considered well-settled in India if you have purchased a home of your own. But with the current real estate prices in the country, buying a home is something that cannot be done without taking a loan. Fortunately, there are now several banks and financial institutions in the country which offer types of home loan at competitive rates to eligible borrowers.
Moreover, with the increasing demand for home loans, the lenders now offer many different types of home loan to meet the different requirements of the borrowers. If you are looking for a home loan, we have created a list of popular types of home loan in the country to make the selection easier for you.
Types of Home Loan
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Loan to Purchase Home
This is the most common type of home loan in the country. With the help of this loan, you can buy a new residential property or can even buy a resale property from a previous owner. Lenders generally offer these loans on fixed interest or floating interest. In most of the cases, the financial institutions sanction around 85% of the cost of the property as a home loan.
You are required to pay the remaining as down-payment. The lenders have their own eligibility criteria on the basis of which they accept or reject home loan applications.
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Loan to Construct Home
As the name suggests, this type of loan is offered when you want to construct a home of your own on a residential plot or land. But before beginning the construction, make sure that you do consider factors like the construction site, financing cost and the design of the house as they will help you compute the construction cost better.
Also, remember that the cost of the land where you want to construct your home should have been purchased within 12 months from the time you apply for the loan as only then the land cost will be included in computing the cost of your new home. After a rough estimation, you can then apply for a home construction loan at your preferred lender.
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Loan to Purchase Land
If you want to buy a piece of land or a plot where you want to construct a home, a land purchase loan is what you need. This type of loan is offered by buying a commercial as well as the residential land/plot. Most of the lenders offer around 85% of the total cost of purchasing the land as the loan amount.
If you are above 21 years old and have a consistent flow of income, you can apply for a land purchase loan. These loans are offered for a maximum tenure of 15 years and your retirement age would also be taken into consideration when fixing the loan tenure. In most cases, land purchase loans are smaller than loans to buy home.
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Loan for Home Improvement
If you want to renovate your home, now there is a home loan for that too. Be it renovation, repair works, internal or external painting of your home, external repair work, electrical work, flooring tiling, construction of water tank, waterproofing, etc. are some of the reasons for which you can take a home improvement loan.
While these types of home loan were not very common in the past, an increasing number of homeowners now consider them for home improvement. These loans are great if you want to renovate your home soon but do not have the necessary funds. There are several banks and NBFCs that now offer this kind of loan at competitive rates.
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Loan for Home Extension/Expansion
If you are planning to expand your existing home, you can look for a home extension/expansion loan. This type of loan is applicable when you want to alter the existing structure of your home and add additional space by constructing a room, a bathroom, a floor, or even a balcony.
While most of the lenders offer a different type of home loan known as home extension/expansion loan, some of them also include this requirement under the home improvement loan. Make sure that you try to find out how a lender categorizes this type of loan before applying.
Home loans are now inevitable. But while they are now easily available, it is very important to first understand your requirements and only then apply for a loan that
