Home Loan Types

1. What is a Home Loan – Basic description for understanding
A Home Loan is a secured loan that borrowers obtain in order to purchase or construct a home which is given by hypothecating the property to the lender. In today’s day and age with spiraling real estate cost, it is nearly impossible for any individual to fund his/her dream house without taking a home loan. Buying a home is one of the biggest purchases that an individual undertakes in the life, most borrowers utilize home loans to assist with their home purchase and modification in their homes. The repayment of the home loan is done in installments over the lifetime of the loan. As it’s a Security backed loan if the borrower faults in the payments on his home loan, the lender may claim the property.Typically home loans can have either a fixed or a floating rate of interest. As the name suggests a fixed rate home loan remains at the same rate of interest for the period specified, whereas in a floating rate home loan the rate is subject to change from time to time depending on the various macro economic factors.However, these days most banks offer fixed rate home loans only as special schemes or at a rate of interest higher than the floating rate home loans.

2. Kinds of Home Loans Available – Home Purchase, Home Construction, BT Loans, LAP etc.There are different kinds of home loans available in the market, they are tailor made to suit the different needs that may arise for different individuals.A brief description of the types of home loans available is as below:

# Home Purchase Loan
As the name suggests, a Home Purchase Loan is a common type of loan for purchasing a home. It can be typically of two types:

A. For Purchase of Ready/Resale Property

  • Loan up to 80% of Property Value.
  • Repayment Tenure- Upto 20-25 Years depending on bank to bank.
  • Loan Amount – UptoRs. 10 Crores.

B. For Purchase of Under Construction Property

  • Loan up to 80% of Property Value.
  • Repayment Tenure- Upto 20-25 Years depending on bank to bank.
  • Loan Amount – UptoRs. 10 Crores.

In addition to the above, certain banks also offer home loans with home credit facility, which are loans linked to the accounts held by individuals in those banks, and offer great saving potential to the customer.

# Home Construction Loan
As the name suggests, a Home Construction Loans is available for the construction of a new home. It can be typically of two types:-

A. For Self Construction

  • Loan up to 100% of Construction Estimate.
  • Repayment Tenure- Upto 20 Years..

B. For Purchase of Residential Plot + Self Construction

  • Loan up to 100% of Construction Estimate.
  • Repayment Tenure- Upto 20 Years..

# Loan against Property
Loans Against Property are loans available against your existing property, this in true essence is a mortgage. In case of this loan, the property needs to be loan free.

  • Loan up to 70% of Property Value.
  • Loan against Residential / Commercial / Industrial Property
  • Repayment Tenure Up –to 20 Years
  • Loan Amount – UptoRs. 15 Crores

# Balance Transfer Loan
A Balance transfer loan is when you already have a Home Loan running from a financial institution and you wish to move it to another lender to get an interest rate benefit. While doing a balance transfer you may also have the option of enhancing your loan amount with the new lender. This has become an extremely beneficial tool for the customers as RBI has now waived prepayment penalty on home loans, and hence moving from one lender to another is extremely easy in the current scenario. In addition, in a floating rate home loan one always gets the opportunity of lowering their monthly outflow by getting a Balance Transfer done as there might be some lender who is operating at a rate lower than your current lender.