Can you opt for a home loan to construct your house?

By: |
September 24, 2021 6:32 PM

Borrowers should keep in mind that loans for home construction are not offered by all lenders. Hence, one needs to have enough time in their hands and do proper research to get the best deal.

Home loan, top up home loan, home loan interest rates, Longer repayment tenure, Higher loan amount, Quick processing, documentation, Lower interest rate real estate, ready-to-move-in house, under-construction property, ready-to-move-in house vs under-construction property, GST, RERA, rental income, tax benefits, home loan, Immediate AccessThe amount of home loans that one can take depends on the borrower's income.

In the last couple of years, the accessibility for those looking to buy/build a home for self-occupation or investment purposes has increased.

While applying for a home loan the borrower’s income and repayment capacity are the two most important factors. Experts say, most banks and non-banking financial corporations (NBFCs) have loan eligibility calculators on their websites to determine if one is eligible to take a home loan.

Some of the key eligibility criteria to take a loan to construct a house includes:
● Age Bracket – 21 to 65 years
● Occupation – Salaried or self-employed
● Minimum salary/income – Rs 25,000 per month
● Minimum Credit Score – 750
● Loan Tenure – 5 to 30 years

Note that, these are some of the general criteria for most lenders – based on the borrower and various other factors like credit history, credit score, lenders approve the loan.

What is the amount that can be borrowed?
The amount of home loans that one can take depends on the borrower’s income. Usually, the maximum loan one can take is 80 per cent of the property value and the remaining will have to be a down payment.

Having said that, Dipika Jaikishan, Co-founder and COO of Basis, says, “The EMI should not exceed 60-65 per cent of one’s income. If a borrower could have a co-applicant, his/her income can be considered by the lender to increase the loan amount.” Additionally, she points outs, “if one’s need for a loan may not be as high as 60-80 per cent of the amount, he/she can access smaller amounts such as Rs 2-5 lakh through home loans.”

Can one opt for a home loan to construct one’s house?
Borrowers who plan to get a construction loan should know that not all lenders provide loans in this category. Jaikishan says, “One should check with the bank first. Another point that borrowers should be aware of is that banks do not disburse the entire loan amount in one go and might provide the borrower with the money in tranches, depending on the progress of the construction work.”

She further adds, “Borrowers should keep in mind that loans for home construction are not offered by all lenders. Hence, one needs to have enough time in their hands and do proper research to get the best deal.”

Additionally, even though banks and lenders offer loans up to 80 per cent of the property value, some people might need a lower amount as a loan. Experts say, some banks/lenders might offer such loans, however, the interest on small loan amounts may be higher. Jaikishan adds, “On the other hand, one can consider a personal loan for the same amount which might be more flexible in the pay-out.”

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