Here Are Seven Different Types of Home Loans in India in 2021

In India, the most common type of loan is the home loan. You can get affordable loans in almost any part of the country. With the Indian government following the mantra of ‘housing for all,’ the number of people availing of home loans is likely to increase in the coming years.

If you are planning to avail of a home loan in the coming months, the first thing you must familiarize yourself with is the different types of home loans available in India. 

Borrowers must also try to sit down with their lender, inform the lender of their income and try to figure a home loan plan that works best for them based on their monthly income and other income sources.

Types of Home Loans

Loans for Purchase of Land

Several banks provide land purchase loans. Buying land is a smart deal: the buyer can either keep the land as an investment or build a house on it whenever he has money. Most lenders that give land loans agree to sanction 85% of the cost of the land. Check your monthly EMI as well as calculate home loan eligibility before applying for a loan to purchase land. 

Loans for Home Purchase

A loan taken to fund the purchase of a new or pre-owned home is the most common type of home loan in India. This type of loan is also extensively available, and many banks provide it in a variety of forms. In the case of these loans, one can either opt for a fixed or floating interest rate regime and the interest rate on these loans typically range between 9.85 per cent and 11.25 per cent. In addition, most financial institutions agree to lend up to 85% of the total home value. 

Loans for Construction of a House

This loan is designed specifically for people who want to build their own home rather than buy one that has already been built. This form of loan has a separate approval process as it takes into account the plot cost as well. 

When applying for a house building loan, the most crucial requirement is that the plot must have been purchased within a year of applying for the loan for the plot cost to be included in the loan amount. A preliminary estimate of the building cost is used to determine the loan amount. Under this type of loan, a financial institution can choose to disburse off funds all at once or in instalments.

House Expansion or Extension Loans

In case you wish to have a second balcony or maybe a third bedroom, then some banks also provide loans for home expansion. Such expansions can include alterations to the existing structure as well as the addition of new rooms.

Home Conversion Loans

Home conversion loans are available for people who have already taken out a home loan and purchased a home with it but want to relocate. Borrowers can fund the purchase of a new property and avoid repaying their prior home loan by transferring their current debt to the new home. However, this type of house loan can be costly.

Loans for Home Improvement

External and internal repairs, painting, installation of a roof-top water tank, and electrical renovations are all examples of renovation and repair work that will improve the appearance of your home. However, if you don’t have the funds to repair or renovate your property, there are specialised home improvement loans available.

NRI Home Loans

The application procedure and formalities for this type of loan are different from the others because it is specifically designed to assist non-resident Indians in purchasing a residential property in India. NRI loans are generally available through most commercial and public sector banks as part of their home loan portfolio.

Some Other Types of Loans

Balance Transfer Home Loans

When a person wants to transfer his or her home loan from one bank to another for reasons, such as lower interest rates or better services, the borrower can use the option of a balance transfer loan. One can use the money availed of under this type of loan to pay back the money that had been borrowed alongside enjoying other benefits, such as better service and top-up loan facility.

Bridged Loans

Bridged Loans are short-term loans for existing homeowners who want to buy a new house. This loan assist borrowers in financing the purchase of a new home while they are still in the process of selling their current property. This type of loan usually needs a bank mortgage on a new home and is for a period of fewer than two years.

Stamp Duty Loans

Stamp duty loans, a lesser-known type of house loan, are used to finance stamp duty charges incurred on the purchase of a home. 

The Bottom Line

The finest home loan in India is one that meets your requirements while also offering affordable interest rates. Home loans are flexible loans with certain lenders offering these loans for a tenor of 30 years or higher. 

A simple, straightforward home loan is preferable since it comes with no extra hassles. Don’t forget to consider the overall interest cost over the tenor of the loan. Whatever loan you choose, make sure you have a strategy in place to pay off the entire balance as soon as feasible. We hope that with this guide you can make an informed decision about the loan types that will help you buy your dream home.