Different Types of Home Loans

The Indian financial market today offers a wide choice of home loans as well as lenders. Before applying for a home loan, however, it is essential to familiarise yourself with the various home loan types available in India. This knowledge will empower you to make the most suitable choice for your specific needs.

Different Types of Home Loans in India

1. Home Purchase Loan: Typically given for purchasing a new/resale residential property, the amount is disbursed either directly to the builder/seller or to your bank account, depending on the property type and stage of construction.
2. Home Construction Loan: This type of house loan is suitable for those who want to construct a house on a plot of land they already own. The loan amount is disbursed in stages as the construction progresses, and the interest is charged only on the disbursed amount.
3. Home Improvement/Renovation Loan: Designed to finance home improvement or renovation projects, this loan helps cover the expenses associated with enhancing your existing property.
4. Plot or Land Purchase Loan: This loan is typically for purchasing land which can later be used for residential or commercial purposes. The loan amount covers a significant portion of the land cost.
5. Balance Transfer Loan: Consider this type of loan when you wish to transfer your existing home loan from one lender to another for better interest rates or repayment terms.
6. Home Extension Loan: Choose this home loan option when adding extra space to your existing home. It covers the expenses associated with expanding your property, such as construction costs, materials, and labor charges.
7. NRI Home Loan: NRIs can avail of loans to purchase or construct residential properties in India. These loans have specific eligibility criteria and requirements.
8. Pradhan Mantri Awas Yojana (PMAY) Loan: This is a government-backed scheme aimed at providing affordable housing to economically weaker sections (EWS), low-income groups (LIG), and middle-income groups (MIG).

How Do Loans and Mortgages Differ?

Although the terms home loan and mortgage are used interchangeably, they are different. Home loans are exclusively for home purchase, construction or renovation. Mortgages, however, can be used for residential or commercial purposes. Fixed rate and adjustable rate mortgages are the two different types of mortgage loans. The interest rate is typically higher for all kinds of mortgages compared to home loans. The tenure is lesser, upto 15 years. No tax benefits are available for mortgages.

Finally, do your homework and be sure of the exact amount you need. Check with various lenders to get the best home loan that suits your needs.

Frequently Asked Questions

1.Which is the cheapest loan in India?

Ans: Secured loans like home loans have the lowest interest rates.

2.How can I check if my mortgage loan application has been approved?

Ans: Check the status of your loan application using your application reference number on the lender’s website.