There is something extremely fulfilling about living in a house that you have designed and built. For one thing, you can specify the number and structure of rooms. You can decide which direction your house will face. More importantly, you have full control over the materials used in the construction. You can prevent the use of substandard wires or concrete. You can ensure that the designers you hire give you the best design. But it is not feasible to pay for the whole construction out of your own pocket. That is why you should check out a home construction loan. Look at lenders Bajaj Finserv, among many others. Start by looking around for the best deals and compare construction home loan interest rates.

The convenience of a home construction loan

For an average person, it makes sense to take a home construction loan. This helps you avoid a massive drain on your savings. You get to pay for the construction gradually over some years. Depending on the circumstances, you can get certain tax benefits on a construction home loan. Interest rates vary from lender to lender. So, make sure to do a bit of comparative research. That will help you get the best rates. Tenure and repayment schemes are flexible for most lenders.

Lalitha M., a businesswoman, wanted to construct a farmhouse on a bit of family land in Mangalore. She estimated that construction costs could go up to Rs 2 crore. The sale of a previously owned property in Mysore had brought in Rs 50 lakh. The balance 75% of the construction estimate baffled her. Then she hit upon the plan to take a home construction loan. She contacted a few lenders who offered attractive terms. Lalitha was able to construct her dream house on loan without having to dispose of any more property.

Types of construction loans

There are essentially two types of construction loans:

  • one-time closure loans and
  • two-time closure loans.

A one-time closure is also called a construction-to-permanent loan. It is a single loan that covers all your construction aspects. A mortgage on the future completed building acts as the loan pledge. One-time closure is most appropriate when you have a firm handle on the entire estimate.

A two-time closure loan involves two separate loans under one approval. You get a short-term loan at a slightly higher rate for the actual construction process. Once the construction is complete, this loan is refinanced into a long-term mortgage on the completed house.

The role of credit score

To get a home construction loan on attractive terms, a high credit score is of utmost importance. Your credit score, maintained by a credit rating agency like CIBIL, is a quantification of your creditworthiness. It is the first thing about you that a potential lender will check. This is true for all lenders, whether banks or non-banking financial companies like Bajaj Finserv. The most important factor in your loan application approval is your CIBIL score.

How do you ensure that you have a high credit score? Make sure to pay all your dues, bills, loans, and EMIs on time and in full. It could be that a previous default that affected your credit score has since been settled. In such a case, coordinate with the lender in question and the rating agency. You can get your credit record cleared before applying for a fresh loan.

Other factors that matter

To apply for a loan for home construction, eligibility and documents should be kept in mind. But your credit score is not the only thing that matters. Your monthly income, the value of the plot, the down payment you make, and the total EMI amount you are already paying will determine your eligibility.
Apart from your KYC documents, you will need to submit some other paperwork. Here are a few common documents that the lender might ask for:

  • License certificate of a qualified builder
  • Detailed plan of the house design
  • Value appraisal of house by a qualified appraiser
  • Ownership document for land
  • Building permission from the municipal authorities

Scan these documents and upload them along with the loan application form on the lender’s website. Once the lender approves your loan, it is time to get to work. Focus on building a beautiful house for yourself with no worries about the financing.

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