The biggest human’s dream is own home. Every person is dreaming about their own home. Home is a basic necessity for all. It has an important and vital role in economic development. In earlier days, people were saving money in bank or cash or in any schemes for years then they were buying a home. Today is not like that, the time is changed; no need to wait for years. In every corner of your street, there is a financer or bank agent is available to provide you home loans very easily. You just contact them, fulfill their requirement and provide documents; if you are eligible then you will get a home loan in a few days. That’s it, your dream come true.
Over the last two decades, the demand for home loans in India has increased several times over. There are many housing finance companies and banks in India that offer various home loan options other than just purchasing a home. You need to understand each of the options available to know which one is best for your requirements.
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Types of Home Loan:
Many people do not have proper information about a home loan. They think that a home loan means a loan that is used only to buy a home which is incomplete information. We will discuss this in detail.
There are different types of home loans available in the market but the one most appropriate for you should always be considered with respect to the interest rate, repayment structure, time frame, and other aspects involved. Lenders offer home loans, not only for buying a house but also for a variety of other purposes.
Listed below are few of the most common types of home loans in India:
Home Loan – A Loan for Purchase of Residential Property:
A home loan is the most common and popular type of loan availed for residential property. The property could be new or pre-owned. All the banks whether it is nationalized or private and non-banking finance companies are providing the home loan in India. The process of home loan is fully transparent and flexible with fair terms. Banks and housing finance companies offer a variety of exclusive home loans for you so that you can fulfill your dream of owning a home.
The interest rate on a home loan is differing lender to lender and generally the range of interest rate is 8.50% to 11.50% per annum. The interest rate is either floating or fixed. If the applicant is eligible, the lender can offer up to 85% of the loan and the maximum tenure is 25 years.
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Loan for Purchase of Land/Plot:
This type of loan is also very common. As its name suggests, this loan is an offer to purchase open land without any physical structure. This type of loan is very famous in rural or semi-urban areas where land is purchased first and construct the house later as per the land owner’s convenience.
The lender offers up to 85% of the property value as a loan. Some borrowers purchase land solely for the purpose of investment.
Loans for Construction of a House:
If you have a piece of land, you can avail of this type of loan and start the construction of a house as per your preference and requirement. This loan is specially designed for people who want to construct a place according to their wishes rather than buying a pre-constructed house. The loan amount is decided based on a rough estimate of the construction cost. In this case, you could hire an architect or a small scale developer/ contractor to prepare the layout which will show the estimated construction cost. This estimate along with all necessary documentation is submitted to the banks along with an application to get approval for the loan. The loan amount will be disbursed according to the stages of the construction.
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Loan for Expansion/Extension of a House:
If you want to add one more room or an additional bathroom then also you can avail of a loan for expansion. The purpose of this type of loan is to enlarge your existing home. All the finance companies and banks are proving home extension loan. It is comparatively much easier to get this loan approved since the finance required to complete such an exercise is comparatively on the lower side. In this type of loan, also you need to take an estimate and submit to the bank then only the bank will disburse the amount.
Loan for Improvement of House:
Every house needs some maintenance, it could be a renovation, repairing, painting, construction of overhead water tank or some electrical renovation. By doing this, we can increase the age of the construction of our house. All the banks and finance companies are providing loans for improvement of the house. It is also known as a renovation home loan. You can use this type of loan for all purposes which can improve your house. This could be interior or exterior. A home improvement loan is ideal if you would like to renovate your houses but currently lack the necessary funds to do so. These loans are given for a period of 15 years with an interest rate range of 9.5% to 10.5 % per year.
Balance Transfer Home Loans:
Balance transfer home loan means, if suppose you already availed home loan from ABC Bank and now you want to transfer your home loan to XYZ Bank, this called Balance Transfer Home Loan. The reason for transfer this loan could be anything like their services, interest rate, etc. In this type of loan, the new lender will repay the balance amount to the previous lender and then everything will be transferred from the old lender to the new lender such as property documents, agreement, etc.
Some housing finance companies/ banks in India even offer an option of a top-up loan besides the balance transfer home loan amount which helps you get additional funds to fulfill any other financial needs that you may have. The main reason for this loan is interest rate.
Home Conversion Loan:
People who have already availed a home loan and want to move to a new house can opt for home conversion loans. In this case, the loan can be transferred to the new house, borrowers are able to fund the purchase of the new house and are not required to repay the previous home loan. Though it is an extremely convenient option, this category of home loan is very high- priced.
These are very common types of home loan in India which is provided by all the banks and NBFCs. You can avail of any home loan which is suitable for you. Before availing any loan, it is recommended to do some research and compare the interest loan and tenure. There are almost all the banks and NBFCs who are providing the home loans in a very easy way. The aim of the government of India is home to all. For this, the government is also providing subsidy on home loan so now availing the home loans is very easy.