Indians associate homes with financial stability and mental peace. A home ensures a roof over one’s head during the most difficult times. However, with property prices being the highest they have ever been, buying a home without seeking external financial assistance in the form of a home loan is nearly impossible these days. Different homebuyers have different requirements and to cater to these varying requirements, lenders these days offer different types of home loans. In this article, we look at the types of loans available to borrowers these days.
1. Land Purchase Loans
Not everyone wants to buy an apartment or a villa in a gated community. Some people prefer buying land and getting a home constructed on it per their likes and requirements. Similarly, many people buy land from an investment perspective. These people can consider availing of a loan purchase loan.
In the case of land purchase loans, lenders sanction up to 85% of the land’s total value as a loan. However, the LTV ratio in the case of land purchase loans is generally lower than the LTV ratio in the case of home loans. Documents required for these loans are mostly the same as home loan document requirements.
2. Home Construction Loans
If you are someone who plans on getting their home constructed on their own, you must consider availing of a home construction loan. While loan requirements vary from lender to lender for construction loans, most lenders demand that the loan be taken out within a year of buying the property as lenders take into account the cost of the plot.
While deciding the loan amount to be sanctioned. Further, for these types of loans, borrowers are also required to submit a construction plan and a detailed breakdown of the construction cost. While most lenders disburse home construction loans in phases, some lenders also disburse them in one go.
3. Home Purchase Loans
The most popular types of home loans are home purchase loans. These are loans availed of to buy a new or pre-owned home. Under these types of loans, lenders sanction up to 85% of a home’s value as a loan. However, the loan value usually goes down in the case of high-value loans. Further, lenders charge a nominal rate of interest in the case of home purchase loans. The latest home loan interest rates vary between 8.50% and 11.50%. Having a high CIBIL score and a stable income helps one avail of the lowest home loan interest rates.
4. Home Improvement Loans
Buying a home is a huge responsibility. There is always something breaking down and there is always something in desperate need of repairs. A home improvement loan can help buyers maintain their home and keep it in a good state. If you are planning to undertake renovation, add a new room or space to your home, upgrade electrical or plumbing work, etc., you can avail yourself of a home improvement loan. The interest rate on these loans starts at about 8.70% and can go up to 13% or higher. The loan application fee varies between .5% and 1%.
5. Home Extension Loans
Some banks offer loans primarily for home extensions. If you want to add another room to your house or if you want to add a terrace garden or a balcony, you can avail of these loans. Please note that not all lenders offer these loans. So, if you need a home extension loan, you will have to do your research regarding which banks offer these loans.
6. Home Loans for NRIs
Individuals planning to apply for a home loan must know that most lenders extend home loans only to Indian citizens. Only a few lenders extend home loans to non-resident Indians or NRIs. If you are an NRI looking for a home loan to buy a home, know that the requirements and home loan procedure for NRIs is different. So, do some research and keep all the documents for home loans for NRIs ready to enhance your chances of loan approval.
7. Bridged Loans
Sometimes, homeowners decide to sell their house and invest in another house. However, selling a home is no easy task. Sometimes, selling a home can take more than a year. However, the person planning to buy another property cannot wait that long as the prices can go much higher during that time.
Bridged loans help solve this problem. Bridged loans are short-term loans that borrowers can avail of to help them facilitate the purchase of their new home while their old home gets sold. Bridged home loan borrowers must repay the loan as soon as they sell out their old house. The tenor for these loans is usually 2 years or less.
8. Balance Transfer Home Loans
When it comes to home loans, it is crucial that home loan borrowers avail of the lowest interest rate they can get. Low home loan interest rates allow home loan borrowers to keep their EMIs affordable and the cost of borrowing the loan low. Home loan borrowers who think they are servicing their loan at a high-interest rate can transfer their loan to another lender willing to refinance their loan at a lower rate of interest.
Home loan borrowers can also transfer the balance on their home loan to another lender if they wish to change their loan tenor or interest rate regime from fixed to floating and vice versa. They can also switch lenders to benefit from better service. Home loan balance transfer applications are treated as new home loan applications and therefore, only those borrowers who meet their new lender’s eligibility requirements get approved for these loans.
Most homebuyers think that home loans are the only kind of loans available to them. However, today, lenders offer different types of home loans to cater to the varying needs of those investing in the real estate sector. Before applying for a loan of any kind, make sure you are eligible for it. Applying for a loan that you do not qualify for will lead to your application getting rejected and your CIBIL taking a hit. So, before initiating a home loan application, understand which loan you qualify for and apply for the same.