There was a time in the seventies and the eighties when there was no concept of availing funds from banks to buy homes. There were very few home financing companies. It was during the late 1980s that the commercial and other scheduled banks started extending loans for home purchase. Now, it has become easier to avail home loans. More and more people are availing home loans to buy their dream house.
When the Government announced tax savings on home loan interest and repayment, the home loan scene witnessed a tremendous revolution. Banks started thinking of new ways to grant home loans. Housing finance has been categorised into different types based on the need for which the funds are obtained. We shall see some of the Different Types of Home Loans in India .
Loans for purchase of a readymade house:
This is the most popular home loan product in India. An overwhelming majority of people in India go for this loan. There is an emergence of the ‘flat culture’ in cities, especially the bigger ones. Banks started financing people for purchasing flats as per their home loan eligibility.
A flat is always cheaper than buying an individual house. This is because the owner is in possession of an undivided share in land completely in case of individual bungalows and houses. Banks usually sanction a maximum of 90% of the cost of the flat. Being a popular product, loans for purchase of readymade houses or flats attract floating or fixed rates of interest depending on the policies of individual banks.
Loans for construction of a house on own land:
If you go to the smaller towns and villages, you do not find many flats or apartments. People own land in their names and approach the banks to sanction loan for construction of a house on that piece of land. This is also a popular type of home loan in India. The cost of construction differs from place to place. Hence, banks finance construction of homes on own land on the basis of a rough estimate of the construction cost. The banks have valuation experts in their panel. They arrive at the construction cost of the house based on various factors. Banks usually sanction 75% of such construction cost.
Purchase of land/ plot:
You have seen banks financing construction of houses on self-owned plots. Seeing the scope of business in this sector, the banks have now started sanctioning loans for purchase of plots as well under their home loan portfolio. The margin stipulated on such loans for purchase of plots is significantly higher at 50%. Some banks do sanction higher limits, but the thumb rule is generally 50% of the cost of the plot. The purchaser can also approach the same bank to finance for the construction of a house on the plot. Banks consider such requests as well.
Loans for home expansion/ extension
You find such requests from people having individual homes. They might love to have an extension by way of an extra floor or some extra rooms. Banks usually agree to such requests under the home loan portfolio, especially if the original construction activity was sanctioned by them. Even otherwise, loans for home expansion and extension come under home loans.
Loans for home improvement
This is one of the most popular of home loans in India. Customers avail such loans for making minor as well as major alterations, painting, and many other interior decorating works. You have people seeking loans for constructing overhead and underground tanks, compound walls, and even electrical renovations.
Balance Transfer home loans
The Balance Transfer Home loans or Home Loan Balance Transfer are a very common occurrence nowadays because of the heavy competition in the interest rates. A mere half a percentage point difference can spell the difference of a few lakhs of rupees over the entire period of repayment. However, there are certain disadvantages like incurring of extra expenses like fore-closure charges, creating a fresh equitable mortgage, etc.
NRI Home Loans
This is a new addition to the home loan portfolio today. There are many non-resident Indians who wish to purchase homes in India. This is a special scheme where the banks usually insist on repayment from abroad or through NRE accounts held in India. This is a good avenue for banks to improve their home loan portfolio. These NRI home loans are usually high-value loans.
Pradhan Mantri Awaas Yojana
This is a new home loan scheme in operation from 2015. The aim of this particular scheme is to ensure that every India has a roof over his/her head by the year 2022. The urban poor people are the ones that will benefit from this scheme. The Pradhan Mantri Awaas Yojana is an ambitious plan that has various interest benefits. This loan caters to the economically weaker class, the lower and medium income groups as well. The only home loan eligibility criterion is that the applicants should not have an existing house in their name anywhere in India. This is becoming one of the most popular home loan schemes in India.
Stamp Duty Loans
This is a new type of loan that has become popular in recent times. Places like Tamil Nadu have very high stamp duty rates. It is in the range of nearly 8% of the cost of the house. This can be a substantial amount. Banks used to consider stamp duty as part of margin. Nowadays, some banks have started giving to customers to take care of their stamp duty requirements.
Bridge Loans
Some of the new generation banks finance a special type of home loan known as a bridge loan. These are short-term loans designed for existing homeowners desirous of purchasing a new property. This bridge loan helps the borrowers to move into a new house while searching for a purchaser for their existing house.
These were different types of home loans available in India. You can choose any of them according to your requirement. You can easily apply for these loans online through mymoneymantra. We serve financial products of leading banks and other financial institutions. Call our Mortgage Specialists toll-free at 1800 103 4004 for more information regarding best Home Loan offers.
