In India, settling down has become synonymous with owning a home. In this busy world, everyone dreams of owning a perfect abode where they can find solace at the end of the day. Buying a home is also becoming a Herculean task these days owing to the mounting real-estate prices. A home loan is an easy way to fund your house purchase given that it is not a wise idea to burn your entire savings to buy a land or a home.
Banks and other housing finance establishments offer different types of home loans these days. The demand for home loans has increased manifold in recent years and people have different expectations when it comes to a home loan. To cater to the requirements of different sections of society, a lot of banks have come up with this concept of introducing different home loan schemes. To quote a few, several banks offer specially crafted home loans for women, agriculturalists and loans exclusively for purchase of land.
Types of Home Loan:
Lenders offer home loans, not only for buying a house but also for a variety of other purposes. Some of the popular types of home loans available in the financial market are described below.
- Loans for Purchase of Land
Several banks offer loans for land purchase. Purchasing a land is a flexible option, the buyer can save funds and construct a house whenever his finances allow or just have the land as an investment. Up to 85% of the cost of the land is given as loan by lenders like ICICI Bank and Axis Bank.
- Loans for Home Purchase
The most popular type of home loan is the loan for purchase of a new or a pre-owned home. This loan is also commonly available and is offered by many banks in different variants. The interest rate is either floating or fixed and generally ranges anywhere between 9.85% and 11.25%. Also, 85% of the total amount is offered as a loan by many banks.
- Loans for Construction of a House
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 approval process for this type of loan is different for it takes into account the cost of plot also. The most important clause when applying for a home construction loan is that the plot must have been purchased within a year for the plot cost also to be included in the loan amount. The loan amount is decided based on a rough estimate of the construction cost. The amount may be disbursed at one go or in multiple installments. Popular home construction loans include the schemes offered by Bank of Baroda, UCO Bank and Canara Bank.
- House Expansion or Extension Loans
Want another balcony or an additional bedroom? No worries, some banks also offer loans for house expansion including alteration of current structure and construction of new rooms. HDFC Home Extension loan and house renovation loan offered by Bank of Baroda are popular in this category.
- Home Conversion Loans
People who have already availed a home loan and have purchased a house with it but want to move to a new house can opt for home conversion loans. By transferring the current loan to new house, borrowers can fund the purchase of the new home and also need not repay the previous home loan. Though it offers convenience, this segment of home loan is also very expensive.
- Loans for Home Improvement
Renovation and repair works like external and internal repair, painting, construction of overhead water tank and electrical renovation certainly will make your house look better. But if you lack the finances for repair and renovation, banks like Union Bank of India, ICICI Bank and Vijaya Bank offer specialized home improvement loans.
- Balance Transfer Home Loans
This option can be availed when an individual wants to transfer his home loan from one bank to another bank owing to reasons like lower interest rates or better services offered by the other bank. This is done to repay the remaining loan at a revised, lower interest rates offered by the other lender.
- NRI Home Loans
Specially designed to support non-resident Indians in buying a residential property in India, the formalities and application procedure for this type of loan is different from the others. Generally, most of the private and public sector banks offer NRI loans as a product of their housing loan portfolio.
- Bridged Loans
Bridged Loans are short term loans that are designed for existing homeowners who are planning to purchase a new property. It aids borrowers to fund the purchase of new house until a buyer is identified for the existing property. This type of loan usually requires the mortgage of new house with the bank and is extended for less than two years. Several banks like Vijaya bank and HDFC Bank offer bridged loans.
- Stamp Duty Loans
Not a widely known segment of home loans, stamp duty loans are offered to cover the stamp duty charges during the purchase of a property.
With home loans becoming the norm of the day when it comes to purchasing a home, it also becomes equally important to identify your requirement and apply for the right type of home loan. Not only will it reduce the paperwork and simplify the loan approval process, it will also allow you to enjoy a loan at reduced interest rates. Also, make sure you use an home loan EMI calculator to know your amortization schedule and plan the finances better.