Types of Home Loans in India

 Home Loans in India

Types Home LoansOne of life’s most significant turning points for the majority of individuals is purchasing a home;
we all aspire to own a home. However, it has grown increasingly challenging for us to purchase a home using our funds due to the constantly rising real estate prices. You should not, however, give up on your goals. Simply by obtaining the proper type of home loan, you can still buy that flat, bungalow, or apartment or buy a plot of land and construct your dream home there. Yes, you can choose from a variety of various forms of house loans. Here is a comprehensive look at each of them.

How Land Loan different from Home Loan: Click Here

Different Types of Home Loans Available

Property loans are available from lenders for several different reasons in addition to purchasing a
home. Here are some of the most common home loan types that are offered by the banking
system.

Loans for Buying Land

Several banks provide loans for purchasing land. A land purchase is a flexible option because the
buyer can either keep the land as an investment or save money and build a house whenever his
finances allow. Lenders will finance you up to 85% of the land’s cost.

Home Purchase Loans

Loans used to buy new or used homes are the most common kind of mortgage. This loan is also
widely accessible and is provided by numerous banks in a variety of forms. The interest rate,
which can be either floating or fixed, often lies between 9.85% and 11.25%. In addition, several
banks are willing to loan up to 85% of the total.

Obtaining Loans to Build a House

This loan is intended specifically for those who would prefer to build their own home rather than
purchase a pre-built one. This form of loan has a unique approval procedure that takes the cost of
the plot into account. The most crucial requirement when applying for a loan to build a house is
that the plot had to be purchased within a year for the plot cost to be included in the loan amount.
A preliminary estimation of the building costs is used to determine the loan amount. The funds
may be distributed in one lump sum or several payments.

Loans for Extending or Expanding a Home

Do you desire an additional balcony or bedroom? No worries, some banks can provide loans for
home enlargement, including changing the current layout and adding new rooms. If you have the paperwork to demand this new building, a loan like this one enables you to build new rooms, expand or contract the size of the ones you already have, or even add levels to your existing home. With this kind of loan, you may build a duplex or combine two apartments you already own into one huge apartment, among other modifications.

Home Equity Loans

Property conversion loans can be used by borrowers who have already taken out a mortgage and
used it to buy a home but want to switch to a new residence. Borrowers can finance the
acquisition of a new property and avoid making mortgage payments on their old one by
transferring their present loan to their new residence. This type of house loan is quite pricey
despite the comfort it provides.

Home Improvement Loans

Your home will appear better after restoration and repair projects like painting, overhead water
tank building, exterior and interior repairs, and electrical upgrades. However, if you don’t have
the money for repairs and renovations, apply for home improvement loans. Loans for house
improvements can be used to renovate the interiors, including replacing broken tiles,
modernizing your home’s electrical system, and more.

Home Loans With Balance Transfers

When a person wants to transfer their home loan from one bank to another bank due to factors
like lower interest rates or better services provided by the other bank, they can use this option.
This is done so that the remaining loan can be repaid at the new, reduced interest rates that the
other lender is offering.

Bridged Loans

Existing homeowners who intend to buy a new house can apply for bridge loans, which are
short-term loans. It helps borrowers finance the purchase of a new home while looking for a
buyer for the old one. This form of loan often lasts shorter than two years and requires the bank
to hold a mortgage on a new residence.

Home Loan Eligibility

The market for home loans is always expanding, making it easier than ever to realize the dream
of home ownership. Despite being relatively simple to obtain in this day and age, banks have
requirements they must meet before approving a mortgage. You won’t have your house loan
declined if you adhere to the list provided below.

Documentation –The bank looks at your submitted documentation as the first thing it does.
When it comes to obtaining a home loan, this is conceivably the most significant process for the
bank. Your home loan application could be turned down if there is even a small inconsistency in
your supporting documents.

Your income –The decision to approve your house loan is heavily influenced by your income.
The bank examines your income about the loan amount and determines whether you will be able
to repay the loan in full and on time. Your application will undoubtedly be declined by the bank
if they believe you won’t be able to repay the loan. Before applying for a house loan, one should
always consider their ability to repay.

Credit history-One of the key factors that banks consider before accepting your house loan is
your credit score, which is based on your credit history. Your house loan will almost certainly be
denied if you have a low credit score. Additionally, if your house loan application is denied, your
credit score will be further damaged, making it more difficult for you to be approved for loans in
the future.

Age of the Borrower-The likelihood that your home loan application will be accepted increases
with younger age. This is true because a younger applicant has more time than an older applicant
to repay a loan. For instance, a 55-year-old applicant could only have 5 to 10 years to repay a
loan, whereas a 30-year-old applicant will likely have more time to pay off his debts. Again,
before qualifying for a home loan, one must determine their ability to repay.

Debts –The likelihood that your loan will be accepted dramatically decreases if you have other
debts at the time that you apply for a housing loan. This is mere because lending money to
someone who has already committed to a loan is riskier for a banker.

EMI-Banks make sure that the total amount of EMIs you must pay each month for all of the
loans you are currently repaying does not equal or surpass 40%–50% of your gross income. The
likelihood of your application being denied increases if the EMI on your home loan exceeds this
proportion.

A mismatched signature increases the likelihood that your home loan application will be denied.
Banks never fail to meet this criterion.

The chance of having your home loan application rejected is reduced to some extent by
understanding the points outlined above and organizing your application process ahead. Never forget that a denial of your home loan application just makes it more difficult for future loans to
be authorized.

What is the Home loan Interest rate?

The amount that a home loan provider charges a borrower for using the principal is known as the
interest rate. Your monthly EMI for your mortgage is determined by the interest rate on your
housing loan.
Though bank interest rates are subject to change at any time, the State Bank of India now has the
lowest home loan interest rate at 6.65% per annum for its customers. Please take note that this
rate only applies to women who are applying for home loans.

What is Cibil Score and what is the effect of the cibil score?

A three-digit numerical summary of your credit history is known as a CIBIL Score. The CIBIL
Report’s credit history is used to calculate the score (also known as CIR i.e. Credit Information
Report). A person’s credit payment history over time, spanning loan kinds and credit institutions,
is represented by their CIR.
Your credit report should have a CIBIL score of 750 or higher. You will be better able to get
credit cards and personal loans as a result. You will have a difficult time getting a bank loan,
though, if your CIBIL score is under 750. The closer your score is to 900, the higher the chances
of your loan application getting approved.

Conclusion

Nowadays, a variety of house loans are offered by banks and other institutions that finance
housing. People now have a variety of aspirations when it comes to house loans, and demand for
them has grown significantly in recent years. Numerous banks have developed the idea of
offering various home loan plans to meet the needs of various societal groups. Several banks, to
name a few, provide specially designed home loans for women, agriculturalists, and loans only
for land purchases. Before taking any type of home loan, make sure that you are capable of
repaying it.

 

 

Last Updated on September 16, 2022 by Maansa Parameswaran

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