Having a home one can call his own is a dream that everyone has and most people around us are working towards that goal. You may be aware of the fact that banks and financial institutions dole out mortgage loans to those whom they find creditworthy, but did you know that are variants of home loans that you can avail of too? Here is a lowdown about the different types of home loans that you can make the best use of.
This is the most popular type of loan that a borrower can avail. In this type of loan the lender disburses a loan to finance a new or an old residential property at a fixed or floating rate of interest. A bank can lend up to 80-85% of the value of the property as a loan to an individual or joint borrowers depending upon your eligibility.
If you wish to buy a plot of land and construct a house on it, you can avail of a land purchase loan from a bank or a financial institution for the same. You can get up to 85% of the value of land as loan. However, you must bear in mind that the property related documents need to be in order before you think of availing a land purchase loan. It’s best to seek legal counsel to find out whether the land you are willing to purchase is loan worthy. A loan for the purchase of land gives opportunity for individual customers to purchase a residential plot of land to do self-construction. The customer can thus invest in the plot of land and build in the future. Banks normally provide loans for land purchase within municipal limits or if the land is allotted by development authority.
If you own a plot of land or have inherited it and wish to construct a house in it, you can consider taking a home construction loan. The loan application process for a home construction loan is somewhat different though. A lender will scrutinize the property related documents as well as some details you will have to provide. In cases of loans like these you will be expected to provide details such as the time you think will be needed to complete the project, the estimated increase in the cost of building materials and other cost factors. The lender will look into these details and analyze if you are eligible for such a loan.
Do you live in a house that badly needs repair work and are unable to garner funds for it? You should definitely consider taking a home improvement loan in such cases. Things such as external or internal repair work, construction of a water tank or electrical work is covered under these loans. Lenders mostly agree to finance 80-85% of the total repair cost of the house. However, these loans can be availed for houses that are less than 35 years of age and the borrower availing of such a loan should be within retirement age.
If you want to expand a particular part of your house such as adding a new room or bathroom, enclose a balcony or take up any other such alteration work, home expansion loan is for you. Though most banks classify such loans under the head of home improvement, there are some other lenders who dole out specific home expansion loans.
If you already have a mortgage loan for one residential property and are keen on moving on to another, you can do so by opting for a home conversion loan. You need not repay your existing loan, and can simply fund the purchase of a new property by transferring the existing loan to your new house. Although this loan seems useful the costs incurred can be quite large.
If a borrower is unhappy with the services of his current lender with respect to interest rates or the tenure of the loan, he can move his loan to a bank who offers better terms of service. As per the RBI guideline, banks now do not charge any pre-payment penalty for foreclosure of the loan. You can apply for a balance transfer if you have serviced your existing loan diligently for a minimum of two years.
Though this segment of home loans has not been very popular, some lenders do have the option of disbursing loans that can be used to pay off the stamp duty charges of a property in particular, that can be quite steep in itself. However, such loans can be used only for the specific purpose of stamp duty payment alone.
These are essentially short term loans that are meant for people who are already owners of a house and are planning to buy a new house. If you have identified a new property but have not found a buyer for the old house yet, you can consider picking up a bridge loan that is available for a tenure of two years at best and requires you to mortgage your new house with the lender.
These are loans that are specifically designed for the benefits of non-resident Indians. Educational qualifications and place of residence play a big role in deciding factor for a bank offering such loans to NRI borrowers. The paperwork required for such loans are a bit more cumbersome and the interest rates charged on these loans are a tad higher (0.25% - 0.5% over regular home loan interest rates) given that the risk factor for the bank is higher. The maximum tenor for NRI home loan is 15 years and exception beyond 15 years is solely at the discretion of the lender.
Now that you know that various types of home loans that are available in the market, you can scout around for one that is best suited for your needs.