A home loan is a secured loan ideal for purchasing a house or property. It is one among the most popular ways of financing a real estate purchase, especially considering the advantages it offers. However, there are various types of home loans available in the market, many of which a potential borrower may not be aware of.
Let’s take a look at the different types of home loans which can help you meet different requirements.
Home purchase loan: This loan is ideal for the purchase of a new or existing house/ property. Home loans may be offered on a fixed or floating rate of interest and typically extend for a tenure of up to 30 years.
Pre-approved home loan: A pre-approved home loan is a type of loan offered to potential home buyers who’ve already passed a primary level of checks for creditworthiness, income requirements, and financial stability put in place by the bank.
Home construction loan: If you plan to construct a house or residential unit on a plot of land, a home construction loan is the ideal option for you. You may avail this loan for a maximum tenure of up to 15 years.
Plot loan: A plot loan is a type of home loan meant specifically for purchasing a plot of land for the construction of a house. The loan amount offered under this loan will depend on the value of the plot you wish to purchase and your credit profile, among other things.
Top-up loan: A top-up loan, as the name suggests, is a loan which a borrower can take over and above their existing home loan. This loan may be used to fund personal needs such as renovating an existing property, expanding your business, funding your child’s education, financing a wedding, etc.
Home extension/renovation loan: This is the ideal type of home loan for those who want to renovate their existing property, or wish to extend it. The loan can be used for internal or external renovations/ improvements such as whitewashing/painting, plumbing/sanitary work, flooring or tiling, construction of additional rooms, etc.
Home loan balance transfer: If you are seeking better terms on your existing home loan, a home loan balance transfer is an option you can explore. Here, the outstanding home loan balance is transferred from an existing lender to a new lender, typically for more favourable terms such as a lower interest rate, or a longer repayment tenure.
Adhil Shetty, CEO, Bankbazaar.com, explains, “When choosing a type of home loan, take time to evaluate your requirements. Evaluate all available options and choose what is cost-efficient and easily available to you. It becomes much easier to get a home loan if you meet the bank’s eligibility criteria for credit score, income, and repayment capability, amongst other things. Ensure that you compare interest rates before finalising and read the terms of the loan so you may repay it without delay or default.”