For Indians, homeownership is important and home loans help most Indians realize this dream. Home loans are low-interest-rate and long-tenor loans that come with the end-use restriction that the loan borrower can use the funds to purchase a property. Affordable interest rates and consequently, low EMIs, high LTV ratio, long repayment tenor, and home loan tax benefits make these loans quite popular. To navigate the home loan process smoothly, loan applicants must meet all the qualifying criteria and possess all the required home loan documents.
In India, most people presume that home loans are sanctioned only for buying a residential property. This is not the case. There are many different types of home loans and this article discusses these different types of home loans.
Exploring Different Types of Home Loans: Here Are the Options Available
Basic Home Loan:
These are loans sanctioned to help with the purchase of a home. Under this category, lenders sanction up to 85% of the home’s net value as a loan. The borrower must arrange and pay the remaining amount as a down payment. The LTV ratio, which is the ratio of the loan value sanctioned to the value of the property, is lower for properties whose cost exceeds Rs.75 Lakh.
Home loan interest rates are highly economical and borrowers can take up to 30 to 40 years to repay the loan. However, one must keep in mind that the longer the repayment period, the higher the total interest payout and the cost of borrowing funds. These days, lenders also offer home loan balance transfer, home loan prepayment, and foreclosure options to further make the home loan journey easy for loan borrowers.
Home Construction Loans:
Many people choose to construct a home to their taste and liking over buying a home or a flat in a gated community. If you already own a piece of land and need money to construct a home over it, you can consider applying for a home construction loan. However, there are a few things that you must know about home construction loans.
To start with, unlike home loans, which are released into the borrower’s account in one go, home construction loans are released in installments. Further, your lender will decide the loan amount to be sanctioned based on the construction plan submitted by you. Finally, home construction loan interest rates tend to be slightly higher than home loan interest rates.
Home Improvement Loans:
Home improvement loans, also known as home extension loans, are loans that homeowners can consider availing of when they need funds to undertake a renovation or refurbishment task. For instance, if a loan borrower needs funds to construct another room or get the interiors done for a particular part of the house, they can consider availing themselves of a home improvement loan. Home improvement has become quite expensive and availing a loan instead of compromising one’s liquidity may be the smart thing to do.
Home Loan Balance Transfer Loans:
Over the last few years, one of the most beneficial services that lenders have started offering home loan borrowers is the home loan balance transfer. Using this facility, existing home loan borrowers can transfer their remaining home loan balance to another lender willing to refinance the loan on more beneficial loan terms and conditions.
In the majority of cases, people transfer their home loan when they find another lender ready to refinance the loan at lower home loan interest rates. A lower inter est rate not only helps keep the cost of borrowing funds low but also leads to low and affordable EMIs, thereby easing the process of loan repayment.
Further, when borrowers opt for a home loan balance transfer, they are given the option of availing a top-up loan. Top-up loans are sanctioned at low interest rates and borrowers can use them to meet all kinds of house-related expenses needs.
These are the different types of home loans available in India. If you are planning to secure housing finance, make sure to choose the right home loan option for you.