Different Types of Home Loan in India
- Banks and NBFCs offer different home loan options to consumers. These home loan options are available for purchasing a new home, for renovation, balance transfer, among others. The financial institutions offer customised plans for unique home loan requirements.
- In this article, we will give your brief information about the variety of home loans offered by different banks and NBFCs.
Home purchase loan
- It is the most common home loan option availed by the consumers while they plan to buy a new home. Major banks and NBFCs such as SBI, HDFC, Citibank, Bajaj Finserv, among others, offer home purchase loan options.
- There is a margin amount maintained by these financial institutions; they offer 80- 90% of the value of the house as the loan amount.
NRI Home Loans
- These loans are specially designed for non-resident Indians planning a residential property in India.
- The procedure for applying and the formalities are different from other home loan products. Most of the banks have NRI home loans as part of their housing loan portfolio.
Home improvement loan
- Homes require repair works, renovation or for extension purposes. Banks offer improvement loans for such purposes. You can borrow the amount sanctioned for the external or internal development of the house.
- Some banks have a dedicated section for extension of home loans. However, all major banks and financial institutions offer home improvement loans. Banks provide 80-90% of the estimated amount.
Home construction loan
Banks offer home construction loans to borrowers looking for funds to construct a new house. The formalities and interest rates are similar to any other home loan process.
Home conversion loan
- If you already took a home loan to buy a house and if you need an additional amount for purchasing another house then you can opt for home conversion loans.
- The outstanding balance of the previous loan gets transferred to the new loan taken.
- People who wish to eliminate the need to pre-pay the existing loan.
- Borrowers may end up paying higher interest rates than offered in regular home loan schemes as per the lender bank’s policy.
Land purchase loan
- If a borrower wishes to buy land for constructing a house or for other investment purposes.
- The loan tenor is less than usual home loans and ranges between 5-15 years meaning the EMIs are relatively higher.
- Most lenders keep margin money for the land purchase loans and the loan to value ratio is upto 70% of the property’s value. Borrowers have to bear the rest of the amount.
- The interest rates are similar to regular home loans.
(Note: Purchasing agricultural land is not allowed in this plan)
- Banks offer customised loans who want to sell their existing house and purchase a new home.
- This loan fills the financial gap created while buying a new home and finding a buyer for the existing house.
- This loan is given on a short-term basis and can be availed in the interim period of purchasing a new house and selling the old one. Due to the short-term nature, the rate of interest offers is higher than regular home loan rates.
- To get this loan, you have to provide the details of new property to your lender bank and buyer for the old house within six to twelve months. If you are unable to provide that, then the lender bank might convert the loan into a mortgage loan with higher interest rates.
Balance transfer home loan
- A balance transfer home loan benefits the buyers lower interest rates in the market.
- RBI mandates that the benefits of lower interest rates should be passed on to the customers, but most of the banks refrain from doing that.
- Customers can switch their existing home loan to another bank at a lower interest rate and reduce your home loan burden.
Stamp duty loan
Banks offer a loan to cover the stamp duty to be paid during the registration process of the property.
Reverse mortgage loan
- It’s an emerging concept to provide financial assistance to senior citizens. In this scheme, the borrower pledges the property, the bank assesses the current market value.
- After the assessment, the bank disburses the loan amount as periodic to the borrower.
- The borrower’s equity decreases with the payment of each disbursement.
Conclusion: There are several home loan options offered by different banks and NBFCs. If you carefully choose the right alternative that suits your requirement, then you can get the best home loan offer with lowest interest rates.
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