5 Types of Home Loan
Home Loans make the mammoth task of buying a home much easier. Since buying a home is one a biggest steps you take, it is advisable to understand the different types of Home Loans that you can avail of. Home Loans from Bajaj Finserv make it significantly easier for you to finance your dream home.
The two basic types of Home Loans based on the interest rate are fixed and floating interest rate Home Loans. When you take a Home Loan on a fixed rate, the interest rate remains that same through the tenure of the Home Loan, while floating rate varies as per the market conditions. Usually, the fixed interest rate is about 1% to 2.5% higher than the floating interest rate.
5 Different Home Loans that You May Consider Based on Your Needs
Land Purchase Loan :
When you’re building a home from scratch, you will need to buy a plot of land. However, building a home that is uniquely yours is easier said than done. You can take a land purchase loan for the purchase of a plot through direct allotment or a resale plot. Although the maximum loan amount will depend on the lending bank, most banks will provide up to 80% to 85% of the property cost. Please note, that there are no tax benefits that will be applicable for a loan for land purchase. You can get tax benefits once the construction starts.
Home Purchase Loan :
If you are buying an existing property, either in an apartment building or a stand-alone home, a home purchase loan is your best bet. A home purchase loan can get you tax benefits under Section 80C and Section 24 (d) of the Income Tax regulations as per the applicable tax rules for FY ‘10-‘11.
If yours is a joint loan, then the other person, say your spouse or parent can also avail of the tax benefit. The loan amount in this case is usually 80% of the total amount whereas the monthly EMI would depend on a number of factors, such as your monthly income, the tenure of the loan etc. However, there are some hidden costs that you should be aware of.
Home Construction Loan :
If you already own a plot where you would like to construct a home to your liking, then you can consider taking a home. The cost of the land will be included in the cost of the house only if the land has been purchased within the previous year. You will need to give an estimate of the entire construction which will then be evaluated by the bank before granting you a loan.
Home Conversion Loan :
If you already have a Home Loan but wish to purchase and move into a new house, this loan would work best for you. With this loan, you can transfer your current home loan to the new house and you don’t have to repay the current loan. These loans can be a little expensive in terms of the interest rate.
Home Improvement Loan :
If you already own a home but lack the funds to renovate your home, a home improvement loan can help. With this loan, you can fund all kinds of renovations, such as internal and external painting, waterproofing and construction, tiling, plumbing and all sorts of electrical work.
Another advantage to taking a Home Loan is that you can continue to take a mortgage loan against your property in India. As you can see, there are a number of housing loan options available in India.
It is advisable, however, do read the fine print before signing on any agreement. It is also advisable that once you have decided on the type of Home Loan, you should negotiate the interest rate with the bank. Lastly, before applying for Home Loan, check your credit rating and verify your eligibility criteria.