Guide to Different Types of Home Loans in India

We all dream of a place of our own. You also have a sketch of your beautiful home close to your heart. You have also seen a dream of owning your dream property and converting it in to a perfect home. Home Loans offered by different banks and financial institutions have made these dreams more attainable and realistic.

 

Although the cost of living has gone up significantly yet easy finance options help a lot of people realize their dream of buying a home. Thanks to various types of home loans that are being offered by different banks and financial institutions, more and more aspiring people are opting for home loans of different types.

 

It is important to note that not all individuals need home loans for the purpose of buying a home or property. Few of you might need a home loan to renovate your house, some may wish to buy a land and then construct their own house and some may wish to add or expand their existing house etc.

 

You name it and they have a loan for it, that’s the trend these days. You can easily avail home loans for different purposes meaning you may opt for a home construction loan, home renovation loan, home expansion loan, land purchase loan, home purchase loan etc whichever suits your purpose.

 

Almost all banks and number of housing finance companies (HFCs) provide the above mentioned housing loans at attractive rates. All you need to do is to study, explore and pick the best deal that suits your home need. Read on to explore the different types of home loans in India and pick the appropriate one that fulfills your requirement.

 

Land Purchase Loan – As the name suggests, these loans are given by banks and housing finance companies when you wish to purchase a land or a plot where you wish to construct your dream home. This land can be used for residential as well as for commercial purpose. Approximately 85 percent of the price of the land is sanctioned as loan amount by majority of the banks. The maximum term for which this loan is advanced is 15 years and of course your retirement age is taken in to account. Anyone above the age of 21 years with a regular income flowing in can apply for a land purchase loan. This loan tends to be smaller as compared to a home loan taken specifically for buying a house. While you plan to opt for this loan you may have to pay 1-2 percent of processing fees that is charged by the bank. Union bank of India, Axis Bank, HDFC Bank Ltd, State Bank of India, ICICI Ltd, United Bank of India etc are some of the banks that offer credit for land purchase purposes.

 

Home Construction Loan – This loan is offered for the purpose of construction of your home on a land or plot or for the construction of a newly acquired home. However, prior to going forth with the construction you should remember that factors like financing cost, site of construction, design of the house and financing cost will form a part of home building cost. It is noteworthy that if the land where you wish to construct your home has been bought within a year of construction the cost of land would be included while you compute the total price of your house. The cost of land does not form a part of total price of house in case where the land has been purchased more than a year ago before the construction begins. Once you have roughly estimated how much you require you may go ahead and file an application for the required amount with a bank or housing finance company. You may receive the loan as lump sum or it maybe disbursed in parts keeping in mind the progress in construction work of your house. Some popular banks that provide home construction loans in India are State Bank of India, United Bank of India, Canara Bank, Bank of Baroda, HDFC Bank Ltd, ICICI Bank Ltd, Mahindra Finance, UCO Bank, etc.

 

Home Purchase Loan – Home Purchase Loans are the most common and sought after product of home loan. While you opt for home purchase loan you may go forth buying a new residential property or you may purchase an existing house from its previous owner. The banks and financial institutions that provide you with this loan sanction approximately 85 percent of the amount required for the purchase of the house. You may opt for these loans at floating, hybrid or fixed rate of interests - whichever suits you the best. Banks like HDFC Ltd, Axis Bank, ICICI Bank, Punjab National Bank Housing Finance Limited, Reliance Home Finance, and Bank of Baroda etc are some of the banks that provide home purchase loans at attractive rates.

 

Home Improvement Loan – Home improvement loan or home renovation loan as it is called is one which gives you steady cash to take up any kind of renovation in your existing home. Repair works, renovation, external and internal painting of the house, electrical work, external repair work, construction of overhead or underground water tanks, tilling, flooring, waterproofing etc all form a part of home improvement loan. Union Bank, Vijaya Bank, ICICI Bank Ltd, Bank of Baroda and Axis Bank etc are a few of those banks which provide home improvement loan.

 

NRI Home Loan – All Non-Residents who have left their native place for some reasons or the other and dream of making a comeback after their respective task gets accomplished can also dream of owning a home on their soil with the NRI home loan. This is a specialized loan that is advanced by banks and financial institutions to NRIs who wish to purchase residential property in India. Besides an elaborate paperwork as compared to the other regular home loans, the formalities remain almost the same. Almost all banks like the State Bank of India, ICICI Bank Ltd, Bank of Baroda, HDFC Bank Ltd, HSBC Bank, Axis Bank ltd, Citi Bank etc provide NRI home loan in India.

 

Home Extension/Expansion Loan – Home extension or expansion loans come handy when you wish to expand or alter the existing structure of your house by adding some extra space. This space could be added by constructing new rooms, enclosing balcony, expanding your bathroom or building a floor etc. Generally 70 – 85 percent of the amount required for the extension or expansion is sanctioned as loan by the banks. Your age, repayment capacity, credit worthiness, time of loan, tenure of loan, credit history etc all form a part of factors that may affect the amount of loan that gets sanctioned. The interest rates may be floating or fixed. Processing fees up to 1-2 percent may also be charged for the purpose. Some banks who provide specialized home extension/expansion loans in India are Bank of Baroda. HDFC Bank Ltd, United Bank of India, Money Laxmi etc.

 

Home Conversion Loan – Those of you who already have a home loan in your name that you had taken in order to purchase a new house can opt for Home Conversion Loan if you wish to purchase and move in to a new house. In the process the purchase of new house can be funded moving the existing loan to the new house. You might not repay the loan on the previous loan, it just gets transferred. This product under the home loan regime may seem useful to many but as per experts it also seems to burn a hole in your pocket as it is expensive.

 

Bridged Loan – Those of you who have set eyes on a new house but have not been able to find a buyer for your existing residence, bridged loan offers a solution. Bridged loans help you to buy your new house while you continue your hunt for a borrower for your existing residence so that you do not miss on to the opportunity of buying the new property that you have set your heart on due to lack of funds.  The loan is advanced for a period of less than two years and you are required to mortgage your new house to the bank or financial institution. This kind of loan surely seems to be a blessing in disguise but it is also advisable that you wrap up your sale deal of the existing house before you opt for the fresh purchase. Vijaya Bank, Bank of Baroda and HDFC Bank Ltd are some of the banks which advance bridge loan in India.

 

Balance Transfer Loan – If you are not happy with the services of your bank from where you have opted for your home loan or want to pay-off your home debt at a lesser rate then you may go forth with the idea of balance transfer loans. You may opt for balance transfer loan when you wish to transfer your home loan from one bank to another. These loans help you to switch your home loan to other bank from your existing bank. The facility of balance transfer loan is offered by Kotak Mahindra Bank, Axis Bank Ltd, ICICI Bank Ltd, Deutsche Bank and other banks.

 

Stamp Duty Loan – Stamp duty loan is yet to gain momentum in India. These loans are designed for helping home buyers to pay off the stamp duty charges that are attached to the purchase of property. The amount that gets sanctioned under the head of Stamp Duty Loan is to be solely used for the purpose of writing off the stamp duty charges that get accrued on purchase of property.

 

It is very much important for you to have a crisp idea of different types of home loans that are available in the market before you shop for home loans. In today’s scenario the market is brimming with diverse home loan products and it is, thus, advisable you lay your hand on the one that solves you purpose keeping that big smile on your face intact.