Getting a house of their own is a dream that many people in India have. However, the prices of a home in many cities, especially metros are very high. It is not possible to finance the purchase of a house out of one’s own savings. One of most popular ways of meeting this gap in funds is to take a home loan.
A home loan is a loan that gives out funds to purchase a home. The home loan does not distinguish between the type of house purchased i.e whether it is an apartment or whether it is a house built on a plot of land. Home loans in India are a very popular way of financing house purchases, especially in metro cities where real estate prices are very high.
Features of a home loan:
1. The home loan value is based on the value of the property. The LTV (loan to value) for a home loan is generally 70% to 80%, which means 70% to 80% of the property value is issued to the borrower depending on his requirements.
2. A housing loan is a secured loan. This means the original property purchase papers and agreements are with the lender. In case of repeated default, the lender can dispose off the property to recover their dues. However, during the repayment of the loan, the borrower can stay in the house.
3. Home loans are repaid through EMIs (equated monthly installments). These EMI depend on the tenure of repayment and the rate of interest.
4. Most lenders do not charge any prepayment charges for extra principal repaid. This works out in the borrower’s favour since they can repay the loan faster and saves on interest cost.
5. The maximum tenure of such loans is generally 20 years. However, most borrowers tend to prepay their loan and pay it off over a shorter duration.
6. Home loans are available at both fixed interest rates and flexible interest rates.
Types of housing loans:
1. Home loan:
This is the standard home loan for purchase of a house.
2. Home extension loan:
A home extension loan works for people who are looking to expand and extend their homes. Some of the common extensions done are:
• Addition of bedrooms
• Addition of bathrooms
• Pulling in a balcony or carving a balcony
• Addition of office rooms
3. Home improvement loan:
A home improvement loan funds home renovations. Some of the common renovations that can be funded with these types of loans are:
• Waterproofing work
• Paint work
• Reconstruction of walls with cracks or structural problems
• Plumbing
• Electrical work
• Building or removing false ceilings
4. Home loan for land purchase:
These loans fund the purchase of plots of land. The plot can be used either for constructing a house or for investment.
5. Home construction loan:
A home construction loan is taken to construct an entire house. A detailed estimate of the costs of construction is required for this loan.
A home loan is a loan that gives out funds to purchase a home. The home loan does not distinguish between the type of house purchased i.e whether it is an apartment or whether it is a house built on a plot of land. Home loans in India are a very popular way of financing house purchases, especially in metro cities where real estate prices are very high.
Features of a home loan:
1. The home loan value is based on the value of the property. The LTV (loan to value) for a home loan is generally 70% to 80%, which means 70% to 80% of the property value is issued to the borrower depending on his requirements.
2. A housing loan is a secured loan. This means the original property purchase papers and agreements are with the lender. In case of repeated default, the lender can dispose off the property to recover their dues. However, during the repayment of the loan, the borrower can stay in the house.
3. Home loans are repaid through EMIs (equated monthly installments). These EMI depend on the tenure of repayment and the rate of interest.
4. Most lenders do not charge any prepayment charges for extra principal repaid. This works out in the borrower’s favour since they can repay the loan faster and saves on interest cost.
5. The maximum tenure of such loans is generally 20 years. However, most borrowers tend to prepay their loan and pay it off over a shorter duration.
6. Home loans are available at both fixed interest rates and flexible interest rates.
Types of housing loans:
1. Home loan:
This is the standard home loan for purchase of a house.
2. Home extension loan:
A home extension loan works for people who are looking to expand and extend their homes. Some of the common extensions done are:
• Addition of bedrooms
• Addition of bathrooms
• Pulling in a balcony or carving a balcony
• Addition of office rooms
3. Home improvement loan:
A home improvement loan funds home renovations. Some of the common renovations that can be funded with these types of loans are:
• Waterproofing work
• Paint work
• Reconstruction of walls with cracks or structural problems
• Plumbing
• Electrical work
• Building or removing false ceilings
4. Home loan for land purchase:
These loans fund the purchase of plots of land. The plot can be used either for constructing a house or for investment.
5. Home construction loan:
A home construction loan is taken to construct an entire house. A detailed estimate of the costs of construction is required for this loan.
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