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Housing: Different kinds of home loans




Financial institutions in India offer a wide array of home loans to consumers. Whether you are looking to buy a home, or extend or renovate your existing home, banks these days can help you with a customized plan to meet your unique home loan needs. Let’s have a look at different types of home loans.

Types of Home Loans You Can Avail

  • Home purchase loan

As the name suggests, this is the most common home loan availed while buying a new home. All major banks including SBI, HDFC, ICICI, PNA, and Axis Bank offer home loans. You will receive a maximum of 75-85% of the value of the house as the home loan.

  • Home improvement loan

Banks offer home improvement loans for the extension, implementation of repair works, or renovation of a home that the borrower has already purchased. The borrower can use the home loan amount for external or internal improvement of the house.

Your Home Loan EMI Calculator can let you know how much home loan for improvement you can achieve.  You can avail about 80-90% of the work estimate.

  • Home construction loan

The home construction loan is typically offered to customers who are looking for funds to construct a new home. The interest rates, application, process and Home Loan EMI Calculator are the same as for any other type of home loan.

  • Home conversion loan

Buyers can take a home conversion loans if they have already taken a home loan from a bank for buying a house and are now in need of an additional loan amount to buy another home. In such a case, the outstanding amount for the previous loan is transferred to the new loan.

This type of loan is usually availed by people who like to eliminate the need to pre-pay the previous or existing loan. However, since these loans are meant for second homes, borrowers might have to pay a higher rate of interest than new home loans, depending on the Home Loan EMI Calculator and the policy of the bank you intend to borrow from.

  • Land purchase loan

This type of loan is availed by people who want to purchase land either for constructing a home or just for investment. Buying agricultural land does not fall in this category.

All major banks in India offer this loan. The tenure of a land loan is much smaller than that of a home loan and usually ranges between 5-15 years. This means that your Home Loan EMI Calculator will show that its EMI is also relatively higher.

The loan to value ratio of land loan lies between 60%-75%, and most lenders have a cap on the maximum amount that you can borrow. You will have to bear almost 30%-35% of the cost as down payment. The interest rates for most land loans are usually at par with home loans.

  • Bridge loan

These are customized loans for individuals who want to sell their existing home and buy a new home. As the name suggests, this loan bridges the financial gap that is created while buying a new home and finding a buyer for the existing house.

Since it is a short-term loan, interest rates are slightly higher than regular home loan rates.

To avail of this loan, you must furnish details of the new property to the bank. If you are unable to find a buyer for your old house within six to twelve months of availing of this type of loan, then your bank might go ahead and use the Home Loan EMI Calculator to convert it into a mortgage loan, with a higher rate of interest.

  • Balance transfer home loan

A balance transfer home loan enables buyers to benefit from lower interest rates in the market. Although RBI insists that lower interest rate benefits should be passed on to existing customers, most of the banks in India refrain from doing so, thus making a balance transfer a lucrative option for borrowers.

Under this type of loan, existing home loan customers switch their home loan to another bank to benefit from the lower rate of interest. A balance transfer home loan reduces the burden on buyers with existing home loans.

  • Stamp duty loan

Banks offer the stamp duty loan to help buyers bear the cost of stamp duty to be paid during registration of the property.

  • Reverse mortgage loan

This is a relatively new concept in India that is aimed at providing financial assistance to senior citizens. Under this home loan plan, the borrower pledges the property, and the bank then the bank uses the Home Loan EMI Calculator to arrive at its current market value, after which the bank disburses the loan amount as periodic payments to the borrower. The borrower’s equity in the property decreases with each disbursed payment. At Housing you get detailed information about each home loan and it helps you to make the decision which one will work best for you.

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