Home loans simplified

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‘Roti, Kapada aur Makaan’ (Food, Clothing and Home) are three essentials for life. While the first two, clothing and food are affordable to most people, owning a home is not.
As housing requirements vary, so do the expenses associated with them. Fortunately, the financial system offers a variety of financial solutions to meet them. Let’s get to know what they are.

1) Home-purchase loan

This is one of the most popular loans. It is utilized to buy a fully built residential unit  from a seller. Many of these loans will cover around 80-85% of market value of the home and the interest rates can either be fixed, floating or a mixture of the two.

2) Land-purchase loan

Land-purchase loans are given by banks or non-banking financial companies (NBFCs) to buy a plot or land on which the loan applicant is looking to construct a house. Generally banks lend up to 80-85% of the price of the plot or land.

3) Home-construction loan

Financial institutions issue home loans to applicants who want to construct a house on a plot owned by them. The loan application and approval process for home-construction loans are different in certain aspects than from the commonly available housing loans.

4) Home-extension loans

This loan is taken by individuals who want to expand or modify their existing house. Few banks differentiate this loan based on the purpose of expansion of the current house. Most banks include this type of loan as part of their home-improvement loans.

5) Home-improvement loans

Home-improvement loans are taken by individuals who own a house, but lack funds to renovate it. Renovation includes – repairs to existing house, painting of the walls, digging a bore well, water-proofing, electrical wiring etc.

6) NRI-home loans

NRI-home loans are specialized home loans that assist Non-Resident Indians who are interested in buying residential property in India. Though the structure of this home loan variant is similar to the regular home loans, the paperwork is a bit more exhaustive.

7) Home-conversion loans

Existing home-loan borrowers who wish to move into another property can avail a home conversion loan to buy a new house.

Posted: September 2017