Home Loans and their Types

A detailed look at the different types of home loans you can get in India

For most people, buying a home is one of life’s most important milestones; we all dream of becoming property owners. But with the ever-escalating rates of real estate, it has become rather difficult to own a property through our savings. But there’s no need to compromise on your aspirations. You can still buy that flat, bungalow or apartment, or purchase a piece of land and build your dream home on it simply by taking on the right kind of home loan. Yes, there are several different types of home loans that you can choose from. Here’s a detailed look at all of them.

1. Regular home loans
   A regular home loan is the most common type of loan, taken to purchase a flat, bungalow, villa or any other property that is either newly constructed or under construction. You can also purchase a pre-existing property by taking on a regular home loan. This is one of the most popular types of home loans, especially if you wish to buy a residential property. The interest rate on this type of loan is generally fixed or floating and is determined before the loan is disbursed.
2. Home construction loans
   If you don’t want to buy a property that is pre-constructed and prefer to customise it to your own specifications, you can take out a home construction loan. To be eligible for this loan, you need to own a plot of land, which you can also get by taking on a different type of house loan – a land purchase loan.  If you want to include the plot cost in the home construction loan, you need to ensure that the land is purchased within a year. The loan amount you can get is determined on the basis of the cost of the plot, and you also need to provide a rough estimate of the overall house construction cost. Such loans are typically disbursed in a single lump sum or in instalments as construction proceeds.
3. Land purchase loans
   As mentioned above, a land purchase loan is also one of the different types of house loans. This kind of loan is offered by most home loan lenders and provides you the flexible option of purchasing a plot of land on which you can construct your house. You can purchase the land with a loan when property rates are low, and construction can be carried out whenever you have the finance. You may also purchase the land solely for investment purposes and sell it for a profit.
4. Home extension or expansion loans
   If you want to make any alterations to your home’s present structure, you can apply for special types of housing finance known as home extension or expansion loans. Such a loan allows you to construct new rooms, add or reduce their size or even add floors on your existing property, provided you have the documents to mandate this new construction. You can convert two flats you own into a single large flat, or construct a duplex and make other alterations with this type of loan.
5. Home improvement or remodelling loans
   Every few years, you may find the need to re-paint your house. You may have to fix a leaky ceiling or hide those hanging wires that make the house look ugly. The costs of these repairs are usually higher than anticipated and a home improvement or remodelling loan is the right type of house loan to help you meet these expenses. Home improvement loans can be taken to refurbish the interiors, including repairing the tiles, upgrading the electrical system or even modernising your home the way you like.
6. Home conversion loans
   If you have taken a home loan, but want to sell the home and purchase a new one in its place, you can take a different type of house loan known as a home conversion loan. This way, you can purchase a new house without looking for a new lender -- you can simply transfer your existing loan to the new house. The funds for the new house can be arranged by selling the existing house, so that you don’t have to worry about repaying the previous home loan.
   Final word: What type of home loan you opt for will depend on your needs, but what you must remember is that you can get maximum finance of up to 85% of the actual market value of the property. This means that you need to provide the remaining 15% as down payment.
   A home loan can help you realise your dream of being a homeowner. Moreover, since these are long-tenure loans, you can comfortably repay them in easy and affordable monthly EMIs.

Related Articles:

• How to Choose a Home Loan?
• Knowledge is power: Know about the 6 most popular forms of home loans in India
• 7 Terms a First-time Home Loan Buyer Must Know

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