Knowing all about home loan is important before Buying a house as it is a big investment that most individuals or families often can’t afford without some help from banks or other financial institutions. This has to be a well-thought after and a well-researched work and the research must begin from something as basic as knowing what a housing loan is and other important home loan facts.
What Is a Home or Housing Loan?
A home loan, also referred to as a housing loan or a home mortgage, is the money that you borrow from a bank, a housing finance company, or a non-banking financial company for buying a house. Another important home loan fact is that you can also take a home loan for extending, renovating, or repairing your existing house. It is a secured debt as the lender, which extends the home loan, retains the title to the property until the mortgage is fully paid off. Loans are available for tenures up to 30 years, depending largely on the borrower’s total income, repayment capacity, age, and credit score. Once you get the home loan, you have to repay it in equated monthly installments (EMIs).
What Are The Different Types of Home Loans?
After learning all about home loan it is also important to learn about different types of loans. Banks or financial institutions offer different types of loans to borrowers to help them meet their specific requirements. The rate of interest depends on the type of loan you opt for, besides other factors. Before exploring the different types of housing loan information, it is better to know about the different purposes for which house loans are extended. At present, housing loans are largely available for the following purposes:
01. Buying a House
You can borrow money from banks or other financial companies for buying a new house, a flat or a bungalow, or any re-sale property.
02. Building a House
You can take a loan for constructing a house on a plot of land owned or co-owned by you. Loans are also available for meeting the costs of finishing an incomplete house.
03. Buying a Plot of Land and Constructing a House
A borrower can take a loan to buy a plot of land and construct a house on it.
04. Extension of an Existing House or an Additional Construction
You can borrow from banks and other financial institutions to meet the expenses of expanding or extending a house.
05. Reimbursement of Expenses Incurred for The Construction of a House
If you have built a house from your own financial resources, you can get a home loan to reimburse the expenses.
06. Home Improvement
You can get loans for improving or renovating a house.
07. Balance Transfer
You can transfer your existing home loan balance from one bank or financial company to another. The bank or financial company where you transfer your loan pays the balance principal amount to your current lender.
08. Bridge Loan
A bridge loan is short-time financing used by people who need immediate funds for a real estate transaction. If you want to buy a new house after selling the existing one, but the sale is taking time, you can go for a bridge loan.
09. Top-Up Loan
As the name suggests, this is a loan offered by a bank or any other financial institution to its existing customers over and above their home loan. The borrowers can use this amount for any personal purpose. This loan is also available to new customers transferring their loans from another bank or financial company.
10. NRI Home Loan
Non-Resident Indians having a valid Indian passport, persons of Indian Origin having a valid foreign passport or those holding Overseas Citizens of India card are also eligible for home loans in India.
Choose a Home Loan That Suits Your Needs
Choosing the right home loan and the lender is as important as choosing the right property because buying a house is a once-in-a-life-time investment, and you should tread carefully at every step.
Firstly, you should assess your requirements and budget. You can use the online calculator of the bank or the finance company of your choice to gauge your potential monthly payment. This helps you plan your finances better. Then collect following information on home loan:
Special Rates
Many lenders offer lower interest rates to women borrowers. Homebuyers should make use of this privilege. Even a slight change in the lending rate could lead to big savings on your loan in the long run, besides lower EMIs.
Expert Advice
Some banks help you in the selection of a house, offering legal and technical counselling to prospective borrowers to ensure the property is free of any legal issues. A customer should always make use of such services.
Look for Additional Benefits
While making your choice of a home loan, you must look for additional benefits the lenders may be offering at that point in time. Some lenders offer attractive schemes and incentives while others give waivers and discounts on processing fees. Besides, banks and financial companies offer special benefits during festivals and important occasions. Having all these housing loan information helps in getting the best deal.
Before accepting the loan offer, you should read the fine print of the bank’s housing finance scheme carefully and seek clarifications wherever necessary. Knowing all about home loan and how a home loan works will save you from any possible troubles in the future. You should also ensure that there are no hidden costs or pre-payment penalties.
Get some more insights here:
Am I Ready To Own a House? A Complete Guide for Intending Homebuyers
Author Bio
Devendra Bhandari
