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Five Different Types of Home Loans in India

by janeausten

Buying a home is one of the biggest purchases one makes during their lifetime. India’s real estate prices have started to soar over the years, but the dream of owning a home need not just remain a dream. With various types of home loans available these days, one can fulfil their dream of buying a home. Each home owner-to-be has different needs, and to meet these carrying needs Indian lenders have started offering different types of Home Loans.

An Indian couple is truly considered ‘settled’ or believed to have made it in life when they purchase a home of their own. This has become synonymous with settling down in India. The pandemic further fuelled one’s need for more than their desire to own a home. The ambition to own a home is shared by many across the country, and to achieve this people need the financial impetus provided by the various home loan types. 

Here are the various types of house loans: 

1. The Standard Home Loan

This is your basic home loan and the most common home loan type that people opt for. This home loan allows you to borrow money from lenders such as us to finance your dream home. Once you meet the home Loan Eligibility criteria and submit the home loan documents required, you receive the loan amount in your account. This needs to be repaid in monthly installments over a tenor decided by you and the lender. 

Lenders can approve a whopping 80-90% of the loan amount if the home loan eligibility is met. Home loan interest rates vary based on certain criteria such as the credit score and the creditworthiness of the borrower. 

2. Home Loan for Construction

As the name suggests this home loan is for construction and building purposes. If one owns a piece of land and wants to construct their dream home, they can evaluate a home construction loan. The difference between a home construction loan and a basic home loan is that in the latter the lender approves a lump sum payment amount. The loan disbursement in the case of a home construction loan is in installments and depends on the project’s construction progress. The loan amount that gets sanctioned is based on the estimated construction cost.

3. Home Extension or Home Improvement Loan

Another common home loan is the home improvement or home extension loan. The name gives it away. A homeowner may want to add a whole floor, a basement, parking, or even just a single room. This is when a home extension loan comes into play. Similarly, one may just want to renovate their home and a home improvement or renovation loan is used for renovating an existing home.

These loans help you to upgrade the current home to a fancier version or even for functional purposes even if you do not have adequate funds to do so. These loans run into lakhs of Rupees as that is the cost to revamp old homes.

4. Home Loan Balance Transfer

This is for borrowers who have already taken a Home Loan from a particular lender and are repaying it. They have the option to switch at any point during the repayment process to a different lender. This is generally done when the borrowers find a type of home loan, the interest rates of which are lower. They then transfer their home loan to this new lender at a reduced interest rate.

In this case, one must be thorough with their evaluation process as the new lender may charge processing fees and other charges resulting in negligible savings. 

5. Pradhan Mantri Awas Yojana (PMAY)

The Government’s Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana allows first-time homeowners to get Home Loans at subsidized interest rates. One can save up to a few lakhs if one opts for this type of home loan. Apart from monetary savings, the PMAY offers an additional advantage of extended loan tenors of up to 20 years. However, this loan will only be available, if your bank has registered under the scheme. While selecting a lender, try and look for one that is registered under this PMAY scheme to gain from it.

Once you are well acquainted with the different types of home loans, choosing one should be easier. Before choosing your lender make sure to compare the various home loan interest rates, use the lender’s home loan eligibility calculator to see if you qualify, and start collecting the home loan documents required. Checking your repayment installments on a home loan EMI calculator will clarify the monthly monetary outflow and you won’t be taken aback when your account debits. 

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