Things you will know after reading this article:
- What is a Home loan?
- Types of home loans
- Eligibility criteria
One of the milestones in one’s life, is buying a home of your own. All of our life’s hard work, the sweat earned money, we dream of living in a place we can call our loan. However, there are times when we are in the need of a helping hand for making a life-long dream come true, and here is when the concept of Home loans step in. As we know loan is nothing but an amount of sum borrowed by a bank or any organization which is paid back in installments, and a rate of interest may apply. Home loan runs on a similar track, nevertheless a loan for something so special in your life has few different features. Lets discuss!
What is a Home loan?
A home loan is the money a bank lends to enable the borrower buy a home, with an agreed rate of interest. This is a secured loan, and the collateral to it is the home the individual is buying itself. In case the person is unable to repay the loan, the bank has the right to foreclose the property. The bank has to attach a Lien to the home in order to make it a collateral officially.
Types of Home loans
There are a number of types of Home loans available, the most common are:
- Loans for Purchase of Land
Several banks offer loans for land purchase. Purchasing a land is a flexible option, the buyer can save funds and construct a house whenever his finances allow or just have the land as an investment. Up to 85% of the cost of the land is given as loan by lenders.
- Loans for Home Purchase
The most popular type of home loan is the loan for purchase of a new or a pre-owned home. This loan is also commonly available and is offered by many banks in different variants. Loans for Construction of a House
This loan is specially designed for people who want to build and design a home of their own liking and according to their wishes rather than buying a pre-constructed house. The approval process for this type of loan is different for it takes into account the cost of plot too The most important clause when applying for a home construction loan is that the plot must have been purchased within a year for the plot cost also to be included in the loan amount. The loan amount is decided based on a rough estimate of the construction cost. The amount may be disbursed at one go or in multiple installments. Popular home construction loans include the schemes offered by Bank of Baroda, UCO Bank and Canara Bank.
- House Expansion or Extension Loans
Want another balcony or an additional bedroom? No worries, some banks also offer loans for house expansion including alteration of current structure and construction of new rooms. HDFC Home Extension loan and house renovation loan offered by Bank of Baroda are popular in this category.
- Home Conversion Loans
People who have already availed a home loan and have purchased a house with it but want to move to a new house can opt for home conversion loans. By transferring the current loan to new house, borrowers can fund the purchase of the new home and also need not repay the previous home loan. Though it offers convenience, this segment of home loan is also very expensive.
- Loans for Home Improvement
Renovation and repair works like external and internal repair, painting, construction of overhead water tank and electrical renovation certainly will make your house look better. But if you lack the finances for repair and renovation, some banks offer specialized home improvement loans.
- Balance Transfer Home Loans
This option can be availed when an individual wants to transfer his home loan from one bank to another bank owing to reasons like lower interest rates or better services offered by the other bank. This is done to repay the remaining loan at a revised, lower interest rates offered by the other lender.
- NRI Home Loans
Specially designed to support non-resident Indians in buying a residential property in India, the formalities and application procedure for this type of loan is different from the others. Generally, most of the private and public sector banks offer NRI loans as a product of their housing loan portfolio.
- Bridged Loans
Bridged Loans are short term loans that are designed for existing homeowners who are planning to purchase a new property. It helpa borrowers to fund the purchase of new house until a buyer is identified for the existing property. This type of loan usually requires the mortgage of new house with the bank and is extended for less than two years.
Who is eligible for applying for a Home loan?
- Age limit, this ranges usually from 23 to 60 years of age.
- Minimum monthly income is stated as Rs. 25,000/- monthly
- The individual should be a citizen of India
- Person should hold a work experience of at least 3 years.
Applying for a home loan is an easy process, it’s easier if your credit score is above average (minimum 750). There are many banks which provide loans to make your dreams come true, at attractive rate of interests. With thorough knowledge you can maximize the benefits to the limit and have a home you can call your own!