Like in every industry, home loan market in India is also brimming with a plethora of choices to meet the varied needs of the customers. Based on the individual requirements, there are different types of home loans that are offered by banks and Housing Finance companies (HFCs).
1. Home Purchase Loans are provided for purchasing new homes or apartments and are offered by all kinds of banks and HFCs. Available for various tenure periods, these loans can be up to 80-85% of the market price of the property.
2. Home construction Loans are offered for building a new home on a plot or constructing a newly acquired home. If you begin the construction within a year of the purchase of the plot, the cost of the land also gets included into the total valuation of the property for loan purpose.
3. Land Purchase Loans are available for buying an empty plot or land for constructing a house or for investment purpose. Purchase of agricultural land does not fall in this category. The loan to value (LTV) ratio can be up to 70% of the market price of the plot.
4. Home Extension Loans are available for adding extensions such as an additional room or a balcony or a bigger bathroom to an existing building or house. The LTV ratio can be up to 70-85% of the amount needed for the extension.
5. Home Improvement Loans are offered to undertake home renovation work that typically includes repairs, painting, electrical work, plumbing, construction of overhead or underground water reservoirs, flooring and tiling, waterproofing, and so on.
6. Home Conversion Loans are offered when the borrower wants to finance the purchase of another home by converting the existing sanctioned home loan to the new home. This way, the previous loan simply gets transferred to a new loan and includes the extra amount required for the new home purchase. Such loans have opted when the borrower can bear the burden of paying a much higher EMI.
7. Bridge Loans are provided by some banks to help a borrower purchase a new home until the existing home is sold. There are times when people want to buy a new house but are forced to wait until their old home is sold and funds are available for the new purchase. Bridge loans help in such events.
8. Stamp Duty Loans are also available to help borrowers pay off the stamp duty charges accrued on the purchase of the property.
9. Balance Transfer Loan is provided to transfer the balance of your existing home loan from the current lending bank to another bank or HFC with an objective to pay off the remaining balance at a lower rate of interest.
10. NRI Home Loans, as the name suggests, are designed for non-resident Indians who wish to buy or construct a new house or property in India. All big banks provide such type of loans.
Conclusion
Home loans are also categorized based on fixed and floating interest rates. Some banks also provide hybrid loans that have a component of both fixed and floating rates. The decision to opt for home loan based on interest rate type depends entirely on the market conditions in near future and the borrower’s flow of income.
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