January 3, 2019

Home Loan

Home Loan is a financial instrument to help you fulfill your dream to own a home. Buying a Home is the most expensive purchase a person does in his or her lifetime. Lack of capital is no more a deterrent to fulfill the dream of purchasing a home. Banks and NBFCs help to make this dream a reality offering home loan to people meeting their home loan eligibility requirements. 

What Type of Home Loan do you need?

The housing need varies from person to person which would determine the type and amount of home loan that a person would need. The housing need may be to purchase a new apartment or to renovate your existing home or to add extra bedroom to your existing home. For purchase of a new apartment, the need of a small family might suffice with a 2BHK while a larger family might need a 3bhk, 4bhk or other configurations. Home loan can be availed for all of the below purposes 

  • Loan to buy a New Home – This is the most basic and common type of home loan to buy a new apartment.
  • Home Improvement Loan – Give your home a new look and feel by redesigning your home to cover expenses on flooring, plaster, painting etc.
  • Home Construction Loan – These are short term loan to finance the construction of your home. Ownership of plot is required to avail this loan. The loan amount is disbursed at each stage of construction.
  • Home Extension Loan – Add more space to your existing home such as a new bedroom, to meet the growing needs of your family.
  • Plot Loans or Land Purchase Loans – Such loans help to finance the purchase of land for your home through direct allotment or through resale.
  • Home Loan Balance Transfer – This type of loan allows you to transfer outstanding loan amount from your existing lender to a lender charging lower interest rate.
  • Bridge Loan – If you plan to purchase a new home and sell your existing home, you might want to consider this type of home loan. Until you are able to sell your existing home, you can arrange money for the purchase of a new home by availing a Bridge loan.

Home Loan Interest Rate

You would in most cases want to go ahead with the lender providing loan at minimum Interest rate however the credit score, income among other factors may dictate the choice of lender.

The Interest rate on Home loan ranges from 8.65% to 10.5%. Lenders offer both fixed and floating interest rates on home loans. With fixed interest rates, the rate of interest would not change during the tenure while the rate of interest you pay with the floating interest rates would depend on the external market conditions.

Home Loan Amount

Loans from 65% to 90% of property value can be sanctioned; however the approved home loan amount is based on the credit profile of the Individual and his or her ability to repay the loan within the defined tenure factoring in current debt and future liabilities.

Home Loan Tenure

The tenure of a home loan can go up to 30 years. The period for which Home loan is approved depends on your current age, retirement age, monthly income, EMI, monthly expenses among others. Lenders would use such data to determine the tenure of loan that can be approved taking into consideration your current and future financial liabilities.