Given the variety of home loans, it’s crucial to know their types and purposes before taking them. Read here the major home loan types for the right selection.
You must have a dream to own your own home. And why not, since it’s the place where you enjoy peace of the mind and comfort without hefty rents and the fear to vacate it. Home loan is the last resort to turn that dream into realty when you lack adequate funds to buy a new home. That’s why the demand for the home loans has been increased dramatically in the past few years. From home buying to the renovation, there are variety of home loans are available for your every need. But finding the right home loan really matters for your convenience and savings. Read below the major home loan types and choose the best one for you:
As the name implies, these loans are granted by the banks or housing finance companies to purchase a plot where you want to construct your house. The loan is given for both commercial and residential purposes. Most banks sanction nearly 85 percent of the total price of the land. A person above the age of 21 years with the regular income flow is eligible for a land purchase loan. The loan comes with nearly 2 percent processing fees being charged by the financial institution. Some things to keep in your mind while opting for land purchase loan are:
a) Not Available for Agricultural Land
b) No Tax Benefits
c) Limited to NRIs
d) Lower Tenure
e) Property Location Matters
One of the most popular and common home loan types, home loan is sanctioned by the banks for buying a new home or an old home. The providing bank can pay up to 85 percent of the amount required for purchasing the home. The loan is available at floating, hybrid and fixed rate of interests. You can come up with the best interest rates by comparison. It is subject to tax benefits while its EMI depends on your income and the loan tenure.
These loans are given for the construction of the home on a land being acquired by the applicant. Before applying for the loan, you must have a rough estimate of the total expenditure coming on your home construction. The cost of the plot which is purchased within a year is also included in the total amount of your house. However, the cost of the land is excluded if its date of purchase has exceeded a year before the construction begins. If it’s your first time to construct a house, seek the services of a good builder who can help you in cost breakdown.
This type of loan comes handy when you already have a home loan while moving into new home. This loan type will transfer/adjust your existing loan with those of your new home including the extra amount without any pre-payment. Home conversion loans are said to be expensive. You must check the remaining installments of your previous home along with the real estate costs and the extra cost of the new home.
Balance transfer loan is helpful when you want to switch your home loan services from one bank to another. It is mostly opted for when you don’t find satisfactory services from your existing bank.
Bridge Loans are the short term loan aiming to finance a new home, until a borrower find customer for his old home.
Whatever home loan you choose, make sure you’ve checked interest rates, loan process, and concession, besides knowing your needs. This helps you clear your doubts while meeting the bank representative. Don’t hesitate to ask them upfront about discount or benefit you get on opting for their loan scheme. Provide the necessary documents asked by the bank.
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