Types of Home Loans in India: A Comprehensive Guide
The option of availing home loans has made it easier for individuals originating from diverse financial backgrounds to purchase their dream house. Loans for houses in India are categorized into different sections and types. The more you learn about them, the better choice you will make for yourself. Therefore, let’s understand the different types of home loans in India with their characteristics and pros.
- Mortgage/Home Purchase
A home purchase loan or mortgage is very frequent. It is principally taken for buying an old or new house. The amount offered depends upon the value of the property as well as your repaying capability.
Important Features:
- It covers 80-90% of the cost of the property.
- The Repayment period can be as high as 30 years
- Interest rates can either be fixed rate of interest or floating rate of interest.
- Home Construction Loan
When you already possess a plot and want to construct a house, this loan would be suitable. This loan covers the construction cost.
Major Features:
- This loan is given in installments at an interval which depends on how the construction is progressing.
- You need to provide a detailed plan of how you intend to execute the whole process of the construction.
- The interest rates are equivalent like those on loans taken to buy a house
- Home Improvement Loan
A Home repair loan is a form of loan for the purpose of improving, adding onto, or even reconstructing one’s already existing Compound. This includes costs such as painting, roofing, or even building works that are done to the house.
Key Features:
- This type of loan has a shorter period as compared with the other home loans.
- Competitive Interest Rates: Home improvement loans are commonly associated with lower interest rates than personal loans. This is owing to the fact that home improvement loans are often secured thereby reducing the risk to lenders.
- Extended Loan Tenure: These loans come with flexible repayment plans for up to 15 years or more or as few as 2 years depending on the loan amount and the lending institution.
4. Home Extension Loan
This is a loan added space to, or expanded, your home. Its application may include the construction of more rooms or floors.
Key Features:
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Similar to the home improvement loan.
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It also needs approval for the implementation of the building plans.
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The interest rates on these loans are competitive.
5. Land Purchase Loan
This is a Land Purchase Loan, which simply means that you are purchasing a piece of land where you plan to put up your future house. You can use this plot of land later in constructing your house.
Key Features:
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Up to 80 – 85% of the purchase cost of land is covered.
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The time taken for repayment is relatively short.
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Interest rates are higher compared to home purchase loans.
6. Balance Transfer Loan
If you have a home loan already with a higher rate of interest, then you can transfer the same to another lender who offers you a lower rate. The term used for such a transfer is called a Balance Transfer Loan.
Key Features:
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Reduces your EMI burden.
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Minimum processing fees.
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Requires good credit history.
7. NRI Home Loan
There are certain eligibility requirements for these kinds of loans.
Key Features:
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Typically, higher rates of interest.
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There exists a co-applicant who lives within the boundaries of India.
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There are comfortable options for repayment
Benefits of Different Types of Home Loans
Many types of home loans have varying benefits as described below:
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Home Purchase Loan: You may take a home purchase loan to buy a new home, and you don’t have to pay it in full when you take that loan.
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Home Construction Loan: We can help facilitate your construction of a house on your property.
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Home Renovation Loan: We can help you add value and comfort to your existing house.
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Home Extension Loan: We can provide an extension to add new rooms for your growing family.
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Land Purchase Loan: This can be used for the supplement the land for work that will be done in the future.
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Balance Transfer Loan: This type of loan might help you save money by reducing the interest burden.
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NRI Home Loan: Specifically designed for NRIs to invest in Indian real estate.
Conventional Loan vs. Home Loans in India
A Conventional loan generally means a standard mortgage that isn’t explicitly backed by the government. In contrast, and in comparison, a home loan in India is mostly constructed for different needs like construction, renovation or home buying.
Conclusion
Individuals must prioritize choosing a home loan that compliments their financial plans. Whether it is for the purchase of a new home, constructing one, or renovating your old apartment, there’s a loan for any kind of requirement. Therefore, do not forget the comparison on interest rates, tenure, and other features before you make a decision. Seek assistance from LIC Housing Finance to avail more information on this topic.