Saturday, 28 October 2017

What Type Of Home Loan Should One Opt For?

Owning a house provides a great sense of satisfaction. In fact, one of the most important goal of every Indian household is to arrange for finances to buy a perfect dream abode. With rising property prices most middle class Indians rely on home loans to meet this goal. It is an easy finance option that has made the dream of owning a home quite attainable. Over the last decade the demand for home loans has increased many folds. In order to tap this growing opportunity in the market, banks and financial institutions have diversified their portfolio of home loans. There are many different kinds of home loans available to cater to the varying needs and expectations of customers. Some people need loan to buy land, while some need to build the house and some need to purchase a house. Let’s have a look at some of the most common type of home loans and understand what you should choose when.
1.      Land purchase loans- As the name suggests this loan is taken if you wish to buy a plot of land to construct your house. The land may be bought for residential purpose or simply for investment. Banks usually finance 85% of the price of the land. The loan tenure can extend for up to 15 years. Like any other credit, loans for purchase of land are also sanctioned after checking your CIBIL score. Expect a favourable interest rate if you have a high CIBIL score.

2.      Home purchase loans- Home purchase loans are the most commonly available and the most sought after source of financing. They provide funds for purchasing a new residential property or a second hand home from the previous owner. The interest rate can be fixed or floating. You can bargain for a good interest rate and better terms if you have a good CIBIL score. Usually banks offer 80-85% of the property price. But sometimes the bank may even sanction upto 95% of the amount required for people with an excellent CIBIL score.

3.      Home construction loans-If you wish to construct your own house on a plot of land rather than buying a prebuilt home, this loan variant is for you. You will need to make a rough estimate of the amount of funds you need to construct the house and accordingly apply for the same. If the plot of land on which you wish to build the house has been bought within an year, then the cost of land will be included while calculating the total cost of house. If it has been more than a year that you bought the plot, then its cost will not be included in the price. The loan amount may either be disbursed in one go or it may be construction linked, where you receive instalments as the construction progresses. ICICI bank home loan is available for this purpose at attractive rate of interest. Almost all leading banks offer these loans.


4.      House expansion or extension loans- Alterations in the current residence to add an extra room, floor, enclosing a balcony or any other type of expansion requires substantial amount of funds. ICICI bank home loans have another variant called home extension loans where one can arrange for finances for expansion purpose. You can also avail these exclusive loans from HDFC bank, Bank of Baroda and many others. The amount of loan that gets sanctioned depends on a number of factors like income level, repayment capacity, CIBIL score etc.
5.      Home improvement loans- If you need funds to beautify your house, renovate it, carry out major repair works, change flooring or even to paint the house, you can go for home improvement loans.

6.      Balance transfer home loans- If wish to transfer your current home loan to a different bank to get lower rate of interest or better services, you can go for balance transfer home loans.

7.      Home conversion loan-If you have already purchased a house on loan and wish to buy and move into another new house, you can opt for home conversion loan. The existing loan will get transferred for funding the new house.

There is a loan for every purpose. And almost all banks offer these different kinds of loans. Explore the different options you have and pick the best deal that suits your individual requirement.

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