A dream which every individual wants to fulfill is to buy a property on their own. As real estate pricing is increasing daily, it’s not easy to buy a house with savings.
This is where the option of a home loan comes in. It is the key to fulfilling the homebuyer’s dream of buying a new home.
Lenders understand the client’s needs, which is why they offer many different kinds of home loans in India. What is a home loan? Most of us know what it is.
However, you might not know that five kinds of prominent home loans are available in India. You can consider the following home loans once you fulfill the housing loan eligibility.
5 Types of Home Loans in India
1. Standard Home Loan
The standard home loan is the most basic type of home loan. It’s also the most preferred type of home loan.
This loan allows you to borrow money from the lending company to purchase a property. When the purchase is complete, monthly payments are made to repay the borrowed funds.
If you meet the housing loan eligibility criteria, the lender can offer up to 80% of the property’s total cost as a housing loan.
2. Home Renovation/ Extension Loan
Home Renovation or Extension loan is another popular home loan option available in India. A home renovation loan can provide funds for improving or renovating an existing house.
Usually, this loan is taken when there is an upcoming wedding in the house or when the house owners want to improve the quality of their home. Moreover, a home extension loan may be needed if you have an existing home and are interested in adding a room or an entire floor.
This type of loan will let you expand or renovate even if you don’t have enough savings in your account.
3. Home Construction Loan
If you own a piece of land or a part of the land and want to construct a house over it, you can apply for a home construction loan.
A home construction loan differs from a basic home loan because it is typically issued in installments based on the progress of the construction work. Whereas in a standard home loan, the lender will hand over the lump sum of the home loan.
The amount of money approved for a home construction loan is determined by the estimated cost of building a new construction/house.
4. Home Loan Balance Transfer
If you already own a home loan and are still making payments, there is an opportunity for switching lenders. Borrowers often do this when they can get a housing loan with another lending company at a lower interest rate.
However, before you switch lenders for your home loan, remember that there may be additional expenses at the new lender, such as processing fees and other hidden costs. Research to compare the home loan balance transfer offer with multiple lenders to transfer your loan with minimal processing fees and other charges.
5. Pradhan Mantri Awas Yojna
The Credit-Linked Subsidy Scheme (CLSS) under PMAY lets first-time homeowners eligible for subsidized interest rates benefit from this scheme. An individual will save approximately Rs. 2.67 lacs on their home loan under this scheme.
Moreover, under this scheme, an additional benefit allows them to avail of extended loan tenure benefits of up to 20 years.
However, this subsidized loan facility is offered by only those banks registered under PMAY. If you are a first-time home buyer, work with a licensed lender to process home loan subsidies under the Pradhan Mantri Awas Yojana (PMAY) to avail you of all the benefits.
Housing Loan Eligibility Criteria For Above Mentioned Loans
Now that you know about the five most prominent types of home loans in India, let’s look at the key points to consider when applying for any of the home loans mentioned above are:
- Good Credit Score
- Less Debt
- Fault Free Credit Report
- Enough Savings In Bank Account
- Legal Documents of Property
- No Default History
Through this post, we have described all five major types of home loans that are handy for individuals in India. These loans have benefits like tax savings, tenure extension, loan transfer, etc. However, homebuyers should apply for a home loan only after receiving estimates and quotations from multiple lenders.