Vikram had just purchased a home. While he wasn't married, and had just begun his career five years ago, this was the equivalent of scaling Mount Everest. And in his books - irrespective of what family and friends said about marriage - Vikram had actually settled down. Many friends agreed. After all, buying a home in India is a tough task, given the rise in real estate prices. Fortunately, banks and non-banking financial organisations offer several types of home loans, depending on your requirement. There are home loans for women, agriculturalists, and even for purchasing land.
Thanks to the demand in purchasing real estate, and the tax benefits that one can avail from a home loan, banks and non-banking finance institutions have the following home loan products available in the market that cater to your needs.
People buy land as an investment, and several banks and non-banking financial institutions offer loans for purchase of land. If you are looking to buy a dream home that you can cherish, you can first avail a loan for purchase of land as an investment. Following this, you can save up on funds and construct a house when the funds allow.
The most common reason why people opt for a home loan is to buy the first house. The loan is provided by most private and public sector banks and competitive rates of interest that can either be fixed or floating, usually between 9.85 per cent and 11.25 per cent. Usually, banks can provide up to 85 per cent of the house price. However, the loan is only disbursed after you pay the initial 15 per cent.
These loans are designed for those who want to build a home from scratch, rather than buying a pre-constructed house. While banks offer these loans, the approval process is slightly different, as the bank also takes into consideration the cost of the plot as well. While applying for a home construction loan, you need to remember that the plot of land MUST be bought in the past year, so that it is included in the loan amount. The amount may be disbursed at one go, or in multiple instalments Banks that offer home construction loans include Canara Bank and Bank of Baroda.
If you want to add another bedroom or add a balcony, you can approach a bank and apply for a home expansion loan. However, there are some terms and conditions involved, which include not damaging the foundation of the structure.
If you are a homeowner who has an existing home loan and want to move to a new house can opt for home conversion loans. They can do this by transferring the current loan to the new house in question. This way you can fund the purchase of the new home and need not repay the previous home loan. Although it is convenient, such loans are expensive.
If you’re looking to renovate your home, you may want to consider applying for a home improvement loan will ensure that you don’t burn a hole in your pocket. Banks such as ICICI Bank and Vijaya Bank offer specialised home improvement loans.
Balance transfer home loans are availed when you want to transfer your home loan from one bank to another owing to reasons such as low interest rate or better services.
Banks have specifically created NRI Home Loans to cater to the audience living outside India. The application process and documentation to avail an NRI home loan is slightly different from the other home loans in India, as you would also be required to also provide your passport and your work visa as proof. Generally, most of the private and public sector banks offer NRI loans as a product of their housing loan portfolio.
These loans are short-term loans that aid borrowers to fund the purchase of a new house until a buyer is identified for the existing property. Bridged loans require the new house to be mortgaged with the bank and can be extended for less than two years.
Stamp duty loans are offered to cover the stamp duty charges during the purchase of a property.
Most banks can give up to 85 per cent of the value of the property, but this also depends on factors such as your current salary, your credit score, and the amount you can shell out each month. Also, check out the bank's rate of interest, as well as features and benefits before finalising on its home loan product.
Keep these documents handy before applying for a Home Loan:
-Photo ID and age proof
-Signed Application form with a photograph
-Residence proof
-Bank statement from the last six months
-Property documents
For salaried:
-Salary slips (last three months)
-Form 16
For self-employed:
-Income Tax returns for the last three years with income computation
-Balance sheet and Profit and Loss account (CA certified or audited) for the last three years
-In case you are applying for an NRI Home Loan, then you will also be required to provide your passport and visa details to the bank providing you with the service.
You can use an EMI calculator using the following formula
You can calculate the EMI you need to pay based on the following formula
EMI = [P x R x (1+R)^N]/[(1+R)^N-1];
where, P, R, and N are the variables, which means the EMI value will change every time you change any of the 3 variables.
P = Principal amount, which is the original amount lent to you by the bank. The greater your loan, higher the EMI you pay the bank
R = Rate of interest, which is the rate at which interest is charged on the principal loan amount. This value has a bearing on your EMI amount and it is important to compare rates of interest before opting for a loan
N = number of years for which the loan has been taken i.e tenure. Since the loan repayment is done every month, the tenure is calculated in months and not years. So, in case you have a 5-year period to pay off a loan, the tenure is 60 months.
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