Types of Home Loans in India

Buying your dream house is an overwhelming process, as you have to manage several things, from house hunting to house payment. You have to align these things according to your budget and capability.

To finance our dream project, we need to consider all possible aspects and one of the payment sources we believe is a home loan.In India, several banks, including Axis, ICICI, SBI, HDFC, and others, offer people various types of home loans according to their requirements.

However, when we visit banks to understand the best type of home loan, we always need clarification while learning about the documents, interest rates, eligibility, and more.

This blog will provide extensive information on different types of home loans, including their documents, eligibility, and more.
Let us get started with our blog.

Things to understand before planning for a home loan

Whenever you visit a bank to discuss your home loan, you listen to several terms that require clarification.
Therefore, before you plan for a home loan, learn some crucial pointers to finance your dream without any turmoil.
In this section, we will understand every point to consider when systematically purchasing a home loan.

  1. Eligibility: It is the first measure that you have to consider while purchasing a home loan. Whenever you ask for a home loan, you must check eligibility for that particular program. You must provide the lender with essential details such as age, qualifications, number of dependents, job stability, spouse details, financial position, and more. According to your income and repayment capacity, you will learn about your eligibility for the home loan from the lender.
  2. Home or loan first: Getting approval before finalizing your dream home is always advisable. It helps you set your house budget and keep your house-hunting focused. If you have approved the amount of the home loan, then you will be able to perform negotiation in a better way and close the deal faster.
  3. Loan amount: When understanding the loan amount, you must know that you will get around 75 to 90 percent of the property cost in the home loan. For example, if the home costs 01 crore rupees, you are eligible for 75 lakh rupees for your home loan.
  4. Home loan cost: Your home loan depends on various levels, including processing fees, administrative fees, interest amounts, prepayment penalties, and more. Therefore, before finalizing the home loan, ask about its cost and understand everything in detail. Also, ask your lender or bank about the hidden charges before completing the procedure.
  5. EMI calculator: EMI is the equated monthly installment that includes both principal and interest (on the outstanding amount) that you must pay monthly to your bank or lender. You can calculate the EMI on the loan amount using various EMI calculators. Another option that you can opt for is pre-EMI if your house is under construction and you have to make a part payment to your developer.
  6.  Tenure: It plays a vital role when applying for any loan. The maximum tenure you get for your home loan is 30 years, based on your eligibility. If you opt for a higher tenure, you will get a relief on the monthly EMI.
  7. Documentation: You must submit various documents while purchasing a home loan, including KYC, income, and property documents. All these documents include valid ID proof such as an Aadhar card, passport, PAN card, voter ID, etc.; the last three months’ salary slip (if you are employed); 3 years’ income tax return (if you are self-employed); and agreement to sell or title deeds.
  8. Insurance coverage: Always opt for insurance coverage when purchasing a home loan. It will help you get the loan repayment benefit if something unfortunate happens in your family. Perform your research before opting for insurance coverage along with your house loan.
  9. Default power: It is always advised to repay your loan amount timely. Suppose you fail to pay three consecutive installments in a row. In that case, the lender can take over your property without the court’s intervention under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

What types of home loans are available in India?

Several banks offer different types of home loans in India; the loan you get will depend on your requirements and the type of property you are buying.

For any home loan in India, you require the following documents: age proof (birth certificate and 10th standard mark sheet), address proof (voter ID, utility bills, and Aadhar card), income proof (salary proofs and income tax returns), identification proof (PAN card, voter ID, and passport), property documents, and existing loan documents (if there are any).

This section will help you become familiar with the various types of home loans that you can get in India to make your dreams come true.

Land purchase

Various banks offer loans for land purchases. It helps borrowers save money for home construction instead of investing in land. If you are eligible, you can get a maximum of 85% of the land amount from the lenders.

Your age must be between 18 and 65, and your profession must include employed, self-employed, professional, and non-professional.

Home Purchase

It is the most conventional type of home loan that people opt for while purchasing their new home. Banks or lenders provide you a maximum of 85% of the house cost. You can get this amount at an available interest rate ranging from 9.85% to 11.25%. For eligibility criteria, your age must be from 18 to 65 years working professional with a good CIBIL score.

House construction

Many people construct their homes according to their wishes instead of buying a pre-constructed house. You can choose a home construction loan for this purpose.

The loan amount is based on the estimated amount you require for home construction. You can disperse the loan amount into parts or in a single go.

For this, you must be a working professional between the age gap from 18 to 65 years, along with a good CIBIL score.

House expansion or improvement

Do you want to add another balcony or perform renovations? Then, this loan type is the best option for you, as it helps you expand and renovate your existing home. Several banks, such as HDFC, Union Bank of India, and Vijaya Bank, offer house expansion and improvement loans.

For this type of home loan, you need to show your house documents and estimated quotation to the banker or lender to approve your loan amount along with other documents.

Balance transfer loans

You can opt for this type of home loan if you want to transfer your home loan from one bank to another. You can transfer the remaining loan amount to another bank with lower interest rates and other benefits.

For this, you need to submit the documents of the ongoing loan along with the list of documents in possession of the existing bank or lender.

NRI Home Loans

NRI home loan is a type of home loan offered to non-resident Indians by various banks or lenders so that they can make property deals in India. NRIs must complete all the formalities and application procedures for their home loan portfolio.

They can opt for home loans in both private and public sector banks. For this, you have to submit an income tax return (except for people coming from Middle East countries) along with your application.

Bridged Loans

In this type of home loan, people take short-term loans by possessing their existing home documents to purchase a new property. It helps the borrower get some amount until they find a buyer for their existing home.

You must submit property and ongoing loan documents to the banker or lender for a bridged home loan.

Perks of taking a home loan in India

  • When you opt for a home loan in India, you will get several advantages such as:
    It offers various tax benefits under the Income Tax Act of 1961, including section 80C, 24(b), and 80EEA.
  •  It provides affordable interest rates compared to personal or credit card loans.
  • It provides a balance transfer option that allows you to opt for lower interest rates offered by another lender or bank.
  •  It has a more extended repayment schedule, which only brings a little burden on your shoulders.

Conclusion

Consider these home loan options for financial assistance to make your dream come true. These types of home loans will assist you in making a big purchase instead of burying them due to low budget or financial problems.

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