Home loans are becoming the only viable option in this day and age for anyone who is looking to buy or build a home. The demand for home loans has increased manifold in India in the past few years and the added advantage of receiving tax benefits is like an icing on the cake. Everyday hundreds of people take out loans to own their dream home.
Loans are not narrowed down only for the purpose of buying a home; lenders provide loans for a variety of related reasons. Different home loan products cater to the different needs of every individual. We have listed down six of the most popular home loans in India:
- Home Purchasing Loans:
Home loans for purchasing a new home is one of the most popular and most readily available types of loan. Used to either purchase a new property or an old home from the previous owner and the bank finances around 85% of the market value of the house. The interest rates are either fixed, floating or hybrid loans. All banking institutions and housing finance companies provide this kind of loan.
- Land Purchasing Loans:
These loans are taken to buy the land upon which the borrower wishes to build a house. Like loans for the purchase of homes, the bank will pay for 85% of the market value of the land. The loan is not restricted to strictly residential homes and can be used to buy land for the purpose of investment as well. Most leading banks such as ICICI and Axis bank offer loans to buy land.
- Home Construction Loans:
These loans are taken by people who wish to construct their own homes on land they have purchased. The application for this loan is a different than the previous two loans. The land on which the borrower wishes to construct should have been bought within the year so that the price of the land can be included as a component when calculating the total price of the house. If the land has been purchased for longer than a year, then the above clause is not applicable and the borrower must make a rough estimate as to how much the construction of the house would cost. They would need to apply for the loan according to this amount. The lender analyses the account and decides whether the loan should be sanctioned or not. The loan amount may be disbursed in one total payment or in several instalments in accordance with the progress of the construction of the house. Banks such as Canara Bank, UCO Bank and Bank of Baroda provide these loans.
- Home Improvement Loans:
These loans are applied for by individuals who already own a house and wish to acquire funds to renovate it. All kinds of renovations and repairs may be financed by using this variant of home loans such as painting, electrical works, waterproofing, etc. ICICI Bank, Vijaya Bank and Union Bank of India are a few of the banks which provide this kind of loans.
- Home Expansion/Extension Loans:
Individuals who wish to pay for expanding their current home may make use of these kinds of loans. The term expansion includes any alterations to the current structure of the house to acquire more space i.e. constructing a new room, a bigger bathroom, enclosing a balcony, etc. While most banks provide loans for these purposes as part of home expansion loans, some banks lend the money for the same purpose as their home improvement loans. Some of the popular banks which provide these kinds of loans are HDFC Bank, Bank of Baroda, etc.
- Home Conversion Loans:
Borrowers who have bought a home by availing of a home loan but now wish to buy and move into another home opt for this category of loan. The borrower is able to fund the purchase of the new house by transferring the current loan to the new house. While there is no need to repay the loan on the previous house and is a very useful tool, this kind of loan has been accused of being expensive. HDFC Bank, among others, provides these kinds of loans.
It’s best for one to do their research before taking a loan so that they are aware of the various forms of home loans and apply for one that is applicable to their specific needs.