Owning a house is everyone’s dream. One of the most sought after ways to raise finances for a property purchase is the use of home loans. This is because not everyone is comfortable to invest all their life savings in a real estate asset. Industry experts also do not recommend to put all your life savings and instead advice to use home loans instead.
Home loans are of different types based on whether people want to purchase new property or renovate the existing one. The banks and the non- banking financial companies (NBFCs) offer a range of home loans that home buyers/ owners can make use of in their real estate journey. In this guide, we talk in detail about the different types of home loans of which a person can evaluate what best suits his needs and avail it.
What is a home loan?
A home loan is the money that is lent by banks and NBFCs to invest in various real estate options. While a home loan doesn’t help in the down payment of the property, it helps in payment of the remaining amount. This is then repaid to the financial institution in the form of equated monthly instalments (EMI).
What are the different types of home loan?
Mentioned are the different types of home loan.
Basic home loan
- These loans help in purchase of a new property that can be an apartment, flat, row house, villa etc. from a developer or a developer authority.
- These loans can be used for construction of a house on a plot.
- These loans can be used for purchase of resale properties.
- The interest rate of basic home loan is either floating or fixed and are between the range of 8.3% to 9.5% generally. In case a person meets the eligibility criteria of a basic home loan, he may be granted around 75-80% of the cost of the property as home loan.
Eligibility criteria for basic home loan
- Age: 18 years to 65 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for availing basic home loan
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
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- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Any existing loan documents ( in case )
Home construction loan
- In case you want to construct a property on a piece of land that you own, you can raise funds for this construction by opting for a home construction loan. This amount can be taken in one go or in instalments.
- A bank or an NBFC takes into account the cost of the plot before approving the home construction loan. The loan amount depends on the rough estimate cost of construction.
- Also, to include the plot cost in the home loan, it is mandatory that the plot is bought within a year.
Eligibility criteria for basic home loan
- Age: 18 years to 65 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for availing basic home loan
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Any existing loan documents ( in case )
Home renovation loan
- Suppose you are staying in a house that requires significant repairs or you want to renovate the house to more effectively use it, then you can opt for the home renovation loan.
- This loan can be used for changing the tiles of the house, painting the house etc.
- The cost of these activity will run into lakhs but will be cheaper than buying a new property. So, even if you don’t have enough savings, you may opt for this home renovation loan and proceed with revamping your house.
Eligibility criteria for renovation home loan
- Age: 18 years to 65 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for renovation home loan
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Any existing loan documents ( in case )
- Documents related to renovation of the home
- Approximate cost of the renovation
Home extension loan
In case you have permission to extend your house and add more floors or add a room to your existing house, you can avail of the home extension loan to get money for construction of the extra area in your existing house.
Eligibility criteria for home extension loan
- Age: 18 years to 65 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for home extension loan
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
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- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Any existing loan documents ( in case )
- Home extension approval documents with blue print
Plot loans
In case you want to invest in a plot of land, you can avail of the plot loans given by banks and NBFCs. Many banks offer loans upto 85% in case of plot loans.
Eligibility criteria for plot loans
- Age: 18 years to 65 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for plot loans
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Any existing loan documents ( in case )
Short-term bridge loan
- Everyone looks for an upgrade at some point of life. If you already have an existing property and have zeroed in a on a new one with bigger configuration, one of the ways to raise funds is to sell the existing one. In case, the existing property is taking some time to be sold, you can avail of the short-term bridge loan to proceed with the sale.
- This loan is extended for around less than two years and the new property that is being bought will serve as mortgage for the loan.
- With this, you will be able to proceed with the real estate investment (not miss what you like) and also not sell your existing in a desperate distress situation.
Eligibility criteria for plot loans
- Age: 18 years to 70 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for plot loans
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Any existing loan documents (in case)
PMAY home loans (Rural home loans)
With the Pradhan Mantri Awas Yojana (PMAY) home loan people in the rural areas of the country can a property in the rural or urban area in the rural market, renovate or extend an existing house. This home loan is in sync with the ‘affordable housing for all initiative’, a pet project of the union government.
Some of the features of the rural home loan are:
- Minimal processing fee (sometimes nil)
- Eligibility criteria is flexible
- Maximum payment tenure is 30 years and the loan amount may be between Rs 2 to 75 lakh.
Documents required for rural home loan
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- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
Balance transfer loan
- While you may have evaluated and chosen the best home loan, these products evolve over time and the market may actually offer something more competitive.
- Having an existing home loan doesn’t stop you from opting for a new vendor. You may anytime transfer the balance to a new vendor who may offer a revised lower rate of interest for you.
Eligibility criteria for balance transfer loan
- Age: 18 years to 65 years
- Employment: Salaried, self-employed
- Cibil score: 750 or above
Documents required for balance transfer loan
-
- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- Bank statement proof that the EMI is being paid
- Loan statement and property documents that existing lender has in his possession.
NRI home loans
As the name suggests, these loans are offered to NRIs who are investing a property in India.
Eligibility criteria for NRI Home Loans
- Age: 18 years to 65 years
- Employment: Salaried, professionals, non-professionals and self-employed
Documents required for balance transfer loan
-
- Age proof: Birth certificate, Class X marksheet
- Address proof: Utility bill, Aadhaar card, voter id
-
- Proof of identity: PAN number, Passport
- Income proof: Salary slip, Income Tax Returns (ITR)
- Property documents
- General power of attorney
- ITR proof of previous year except NRIs in the Middle East
Home loans for unorganised sector
Banks and NBFCs have also come up with tailor made home loan products such as the HDFC Reach Home Loan that offer loans to people who are working in an unorganised sector and want to buy a house, construct, renovate or extend one.
Joint home loan
- In case you a person is unable to secure a home loan individually, you may consider opting for a joint home loan with a co-borrower.
- Because of the co-borrower’s additional information of the income and creditworthiness, the chances of a joint loan getting approved is higher.
Top up home loan
In case you have an existing home loan and are in need for additional money for various purposes, you can get a top-up loan that will provide you with required funds without you submitting any documents or verification. Additionally, you can use this loan for any purpose.
What are the factors to know when choosing a home loan?
- Purpose: Decide on what purpose you need the home loan for and then apply accordingly.
- Eligibility: Check the eligibility that you can avail of before applying for a home loan. You can do this by using the home loan eligibility calculator.
- Interest rate: Check interest rate of the home loan that has you are applying for. Evaluate what works best for you- floating rate or fixed rate.
- Down payment: Understand how much money has to be paid as down payment and how much amount will help you cover the costs of the property.
- Loan processing fee: Know the loan processing fee that you may have to pay the bank or the NBFC for doing the paper work for your home loan.
Housing.com POV
Home loans are not only for buying a property. It is also available for construction of a property, extension of a house and property renovation. You can transfer an existing home loan from one lender to another. While availing a home loan, go through the offer made by the money lender with respect to the interest rate, the type of interest- floating or fixed, the processing fee and the tenure and choose what suits the best for you.
FAQs
A home loan offers more fund and the payback time is also more. In case of personal lone, the amount granted is less and the payback time is short, making it difficult.
Home renovation loan is generally granted to people who owns the property.
Yes, a home loan can be prepaid in case the home loan borrower has surplus funds.
Yes, a home loan borrower can also take a home loan insurance that will cover the outstanding loan amount in case of the home loan borrower’s death. What is better- home loan or personal home loan for buying a property?
Can a person avail a home renovation loan if he doesn’t own a property?
Can a home loan be prepaid in case the home loan borrower has surplus funds?
Do banks provide insurance coverage for home loans?
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |