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Saturday, December 03 2022
Health & Lifestyle

Types of Home Loans – Which one is Right for You?

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There are various kinds of home loans out there that you can take depending upon your needs. For most of us, home buying represents one of the ultimate and biggest financial decisions in our lives, one that not only ensures future security and stability but also helps in building an appreciating asset for the family as well. Home loans have become the biggest enabler of owning property for salaried professionals, middle classes, and citizens who could not think of buying a home with their own savings or accumulated money earlier.

If you are a first time home buyer, you will naturally need more information on the types of home loans available and how you can benefit from the same. Here’s looking at the various types offered by most Indian banks and NBFCs.

  • Regular Home Loans – These are the most common types of loans that are sanctioned for buying apartments, independent homes, bungalows, villas, or any other property which has been constructed or is being constructed. You can also buy any pre-existing property or resale property with a regular home loan. The rates of interest are fixed or floating and will be determined prior to the loan being disbursed. If you were wondering how to buy a house or apartment in the residential market, this is the most important stage once you have finalized your preferred property.
  • Home Construction Loan – These loans are given to those who have ownership of a land parcel or plot. This can be bought initially with a loan for land purchase as well. If you wish to include the plot cost within the loan for home construction, then you have to make sure that the land is bought within a year of sanctioning and the loan amount will be determined on the basis of the plot cost and you will have to provide an estimate of the home construction costs. These loans are also called house building loans in some cases. 
  • Land Purchase Loan – As mentioned previously, these loans are given for buying plots or parcels of land on which you can build your home. The land may be bought for investment purposes and sold thereafter for a tidy profit as well. These loans usually have smaller tenures as compared to regular home loans and do not have tax benefits. Additionally, they require a higher down payment on the borrower’s part in most cases. 
  • Home Expansion or Extension Loan – If you wish to make any additions or alterations to your current house, then you can apply for the home expansion or extension loan as it may be called. These loans are given for building new rooms, adding floors, integrating space, or building a duplex among other purposes.
  • Home Improvement or Renovation Loan – Home renovation or improvement loans are those which are sanctioned for repairs, maintenance, and periodic overhauling of your home. Remodeling and improvement loans may be taken for revamping your interiors, repairing tiles, electrical work, modernizing the home, and so on.
  • Home Conversion Loan – If you have obtained a home loan but wish to sell your home and buy a new one in place of the same, you can choose a home conversion loan, provided you have eligibility. In this manner, you can buy a new home without seeking a new lending institution. You can transfer the current loan to the new home. The funds may be arranged through the sale of the existing property.
  • Home Loan Balance Transfer – You can choose to transfer your home loan from the current lender to another lender in return for a more competitive and lower interest rate, better terms and conditions, longer tenure, attractive top-up loans, and similar benefits. These procedures are usually less paperwork intensive in comparison to regular home loans.
  • Top-up loans – You can get top-up loans over and above your home loan, provided you meet certain eligibility thresholds. This amount can be used for various purposes including home renovation, decoration, higher education of children, weddings, and so on.
  • PMAY – The Pradhan Mantri Awas Yojana or PMAY offers interest subsidies up to 6.5% for eligible home loan borrowers in the EWS, LIG, and MIG categories. The subsidy will depend on which category you come under (based on your income), the square foot area of the property you wish to buy, and other eligibility criteria.
  • Joint Home Loan – Joint home loans are usually taken with spouses, siblings, and parents for getting higher loan eligibility and better rates of interest. This will help you share the repayment of the loan, making things more affordable for all borrowers.

Make sure that you choose the right home loan product that is suitable for your needs and remember to apply for an amount that you can afford. Use an online home loan eligibility calculator and home loan EMI calculator for this purpose. Maintain a good CIBIL score and repay outstanding personal loans, credit card debt, and other debts as much as possible before applying.

These are the various types of home loans that are currently available in the market and are offered by almost all leading Indian banks and financial institutions. You should however make a note of the fact that eligibility criteria and other terms and conditions may vary from one lender to another. Choose the right home loan type as per your present requirements and understand all the terms and conditions carefully before submitting your application. Rates of interest may also vary along with the tenure, across different types of home loans.

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Brian Fernandes

Brian is an alumnus of Roshni Nilaya’s Post Graduate School of Social Work, HR Department and has 30 years of local and international HR and General Management experience. Journalism, poetry, and feature writing is a passion which he is now able to pursue at will. Additionally, he loves compering and hosting talk shows. He loves learning and imparting it; so, when time permits, he provides leadership facilitation and soft skills training to Postgraduate students and Corporates in Mangaluru and Bengaluru. Besides, he is an accomplished Toastmaster under the aegis of Toastamasters.org and a designated Distinguished Toast Master.

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