Own your dream home by choosing from different types of home loan

Posted by Bhavna Singhal on December 31st, 2019

It is often said that life may take you to unexpected places, but love brings you home. A home is where the laughter never ends. People dream of owning a house of their own, but the cost of buying a house is beyond the reach for a middle-income earning person. The infrastructure sector is considered to be a booming sector where the demand for houses, flats or bungalow is at peak now. The infrastructure sector makes way for the purchase of the house. This sector makes arrangements for common people to buy flats and bungalows for people in which the government helps them.

To make this infrastructure industry work smoothly, the financial institutes provide offers such as reduced home loan rates, availability of loans at a low premium value. Currently, the most common loan facility that is availed by borrowers in banks is the home loan. 

Types of Home Loan

From the numerous options available on Home Loan in the market, an individual should consider availing the one which caters to their needs and requirements. The home loan interest rate charged by banks varies from banks to banks. One willing to avail such loan should consider the following types of Home Loan. 

Home purchase loan

A home-purchase loan facility is provided to the ones who are interested in the purchase of the residential property. The commercial banks and the financial institutes provide up to 85% of the market value of the house as the loan amount. The interest rate on such home loan is either hybrid, fixed or floating.  

Home construction loan

Financial institutes and banks provide loan facility for the construction of the house on a plot of land.  There are certain facts that have to be taken into consideration when applying for a house construction loan, which is as follows.

• The plot has to be bought within a year.

• The cost of buying that plot cannot be included in the loan amount. Only the cost of construction of that house has to be incurred.

• The borrower needs to have a rough estimate regarding the cost of construction of the house.

Home improvement loan

This type of loan is availed when the existing house requires to be renovated, but the owner lacks funds to renovate it. The renovation cost includes the cost of painting walls, electrical work, water-proofing, digging a bore well, etc. 

Home extension loans

Few banks differentiate this loan from the home-improvement loan while many banks include it in the same. This loan is usually taken by the ones willing to extend their existing houses. 

NRI home loan

These loans can be availed by the NRIs who are interested in buying a property in India. Though it is similar to the regular home loan, yet it requires a lot of paperwork to be sanctioned from the bank’s end.  

Home conversion loan

The existing home loan borrowers willing to shift into another property can avail of the home conversion loan to buy the new property. 

READ:- How Does your Property’s Status affect your Home Loan Interest Rate

Different banks and financial institutes have different home loan facility, which caters to the need of the borrowers. The home loan interest rate is computed based on the cost of arranging money for the borrower, the inflation rate and the repo rate. The potential borrowers should do proper research about the loan they would be opting for as per their requirement.