Top Home Loan Options for First-Time Homebuyers - Loan Trivia


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Friday 30 September 2022

Top Home Loan Options for First-Time Homebuyers


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Obtaining a housing loan is a critical step in purchasing one’s first home. While the myriad of financing options available can seem overwhelming, taking the time to research the basics can save you a great deal of money and time. Here are the top housing loan options for those planning to buy or construct a home for the first time.

New Housing Loans – New home loans are offered to eligible customers looking to buy a property or house for the first time. It is the most popular housing loan available to buy a newly built house or an already constructed building. All Indian financial institutions offer this loan. But each has its home loan EMI and follows the home loan interest rate policy, terms, and eligibility requirements.

Pre-approved Housing Loans – Pre-approved home loans are offered by banks to eligible borrowers. Creditworthiness, income, and financial standing (existing debts) are considered for approving the loan. The loans are availed of before property selection and stay valid for a limited period (typically three months). These types of loans are processed quickly and offer better bargaining/negotiating power with a seller or developer.

Home Construction Loans – Can be availed by those willing to construct a house on a residential plot or a development authority allotted plot. These have a longer tenor, and some lenders even allow special concessions to women. For instance, the loan age criteria can be 65 years in some cases. The option is highly suitable for borrowers who are existing owners of a plot of land or property and simply need the finance to finish constructing the home.

Plot Loans – Plot loans are offered to customers seeking to purchase a plot to construct a house on it. In India, these are available at attractive prices and can be repaid through affordable EMIs with the repayment tenor extending up to about 25 years.

Home Extension or Renovation Loans – Non-Banking Financial Corporations (NBFCs) and Housing Finance Corporations (HFCs) typically sanction these loans to those looking to add or extend to an existing residential property. These home extension loans are offered to existing housing loan borrowers and new customers. Most lenders offer it as a conventional home loan product or as an independent offering within the larger home loan category. Lenders offer home extension loans at a floating interest basis and for tenors extending that go up to 30 years. 

Balance Transfer Housing Loan – If you have already availed of a home loan in India from a lender or an institution but are unhappy with their interest rates or services, then there is no need to panic. The balance transfer option helps transfer an existing and usually high-interest home loan from one lender to another. Also popular as refinancing, this helps a borrower avail of better services and lower interest rates from the current lending institution. Lesser documentation is involved in a home loan balance transfer, and it’s smoother to attain compared to housing loans.

Housing Loan Top Up – Sometimes even after availing of a home loan, an additional sum of money may be needed for meeting additional expenses related to the property. The housing loan top-up facility aids borrowers wanting to meet extra expenses associated with home improvement/purchase/ construction or other personal requirements. 

It is an additional sum of money that a borrower can avail of above the existing housing loan that has been borrowed. The maximum tenor and loan amount available under the top-up loan is likely to vary from one lender to another. Customers have the flexibility to avail of top-up loans from either the existing lender or another lender via balance transfer at improved rates.

Concluding Thoughts

Now that you are aware of your top choices, we recommend using some smart tools like a home eligibility calculator or a home loan EMI calculator to have a fair idea of the home loan interest rate, estimated EMI, etc., before you apply for a loan to buy your dream home.

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