Understanding 5 common home loan types

For any individual being a homeowner is the most fulfilling experience. As this requires a large capital outlay, it may make sense to opt for a home loan to meet the value of the property.

Home loans can be availed for under construction properties, ready properties, or to be self-constructed, each including with different terms and conditions. Financial companies in India like National banks, private banks, and non-banking sectors offer various types of loans and you need to know each option available and to opt for the best based upon your needs. 

1. Home-purchase Loan: The loan amount from the Home-purchase loan is used to buy a residential property. Based on the market value, 80-85% home loan amount is provided by the financial institution. The interest rate on these loans is fixed, hybrid, or floating. 

2. Home-construction Loan: Home loans are issued by financial institutions to those applicants who want to construct a house on a plot owned by them. The approval process for these types of loans is different in certain aspects than from the common housing loans. The terms included for the approval are:

a. Land should have been bought within a year.

b. A rough estimate cost should be made by the borrower that will be incurred for the construction.

c. If the cost of the land not included in the loan amount, only the estimation for the construction of the house is taken into consideration. 

3. Home renovation loans: The term refers to those individuals who own a house, but lack in money to renovate it. Renovation loans include painting the walls, waterproofing, wiring, repairs of the existing house, etc.

4. Home Equity Loans: An equity loan or a second mortgage is a type of consumer debt where a homeowner is allowed to borrow against their equity in the residence. The loan amount is based on the difference between the property’s current market value and the homeowner’s mortgage balance due. 

5. NRI home loans: The specialized home loans for non-resident Indians who are interested in buying properties in India. The structure of this loan is similar to regular home loans with exhaustive paperwork.

The tenure of the loans varies according to its type. Home loans can be available for a maximum of 30 years while land loans for a tenure of 15 years. Before opting for a particular loan, a customer should also understand the hidden charges on these types of loans. Today most of the banks provide home and property loans. Every bank’s response rate to home loans, easy accessibility to home schemes, and flexible payment options have also promoted the advancement of real estate. 

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. Propertypistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.