For many, buying a house is a cherished dream and a significant milestone. Bringing this dream to life demands considerable effort, and one of the most effective ways to make it financially manageable is by opting for a home loan.
What is a home loan?
A home loan is a secured loan that is obtained to purchase a property by offering it as collateral. Home loans offer high-value funding at economical interest rates and for long tenures. They are repaid through EMIs. After repayment, the property’s title is transferred back to the borrower.
A home loan is a type of loan provided by banks, financial institutions, and Non-Banking Financial Companies (NBFCs) to help individuals purchase a residential property. In India, home loans have become increasingly popular in recent years, given the significant rise in property prices and the increasing demand for affordable housing.
Home loans are a long-term financial commitment and therefore require careful consideration before making a decision. In India, there are various types of home loans available, such as fixed-rate home loans, floating-rate home loans, and hybrid home loans.
Types of home loan based on the purpose
Basic home loan
A Basic Home Loan offers an affordable way to fulfil your homeownership dreams. With competitive interest rates, flexible repayment options, and personalised solutions, this loan is ideal for buying your first home or upgrading to a better one. Experience seamless processing and make your dream home a reality.
Home construction loan
Planning to build your dream home? A home construction loan is designed to fund construction costs, offering low-interest rates and flexible disbursement options. It ensures you have the finances to construct your home step by step, without compromising on quality or timelines. Build with confidence and ease.
Home renovation loan
Transform your living space with a home renovation loan. From modern interiors to essential repairs, this loan covers all renovation expenses. Enjoy attractive interest rates, easy approvals, and customized repayment terms to upgrade your home effortlessly, creating a comfortable and stylish environment for your family.
Home extension loan
Need more space in your home? A Home Extension Loan is the perfect solution to add rooms or expand your living area. With hassle-free disbursement, flexible tenures, and affordable rates, you can enhance your home’s functionality while staying within your budget.
Land purchase loan
Looking to buy a plot for your dream home? A land purchase loan provides the financial support you need to secure the perfect location. Enjoy competitive interest rates, flexible repayment terms, and quick approvals, making it easier to turn your vision into reality.
Home loan balance transfer
Reduce your financial burden with a home loan balance transfer. Transfer your existing loan to enjoy lower interest rates, reduced EMIs, and better terms. This option is perfect for saving on interest costs and improving cash flow while staying on track with your homeownership goals.
Joint home loan
Increase your home loan eligibility and share financial responsibilities with a joint home loan. Co-borrow with a family member or spouse, enjoy tax benefits, and access higher loan amounts. It's a practical solution for purchasing your dream home while sharing ownership and repayment duties.
Top-up home loan
Need extra funds for unexpected expenses or additional home projects? A top-up home loan allows you to borrow more on your existing home loan at affordable rates. It’s a convenient way to access extra funds without taking a separate loan.
If you are looking for a home loan, familiarise yourself with the tips to get your home loan approved instantly and then fill out the online home loan application form. In case of loan applications made offline, you can drop by at the nearest branch in your city or call us for more details.
Also Read: How to apply for a Home Loan?
Types of home loan based on the interest rate
Fixed-rate based home loan
A fixed-rate home loan is a loan where the interest rate remains the same throughout the loan tenure. This type of loan is preferred by those who want to avoid fluctuations in interest rates and prefer the stability of a fixed repayment amount.
Floating rate based home loan
On the other hand, floating-rate home loans have an interest rate that fluctuates based on market conditions. This type of loan is preferred by those who are willing to take on the risk of interest rate fluctuations in exchange for the possibility of lower interest rates.
Hybrid home loan
Hybrid home loans are a combination of fixed and floating interest rates, where the interest rate remains fixed for a certain period and then switches to a floating interest rate for the rest of the loan tenure. This type of loan is preferred by those who want the stability of a fixed interest rate for a certain period and then switch to a floating interest rate.
Eligibility criteria for home loans in India
The eligibility criteria for availing a home loan in India vary from lender to lender. However, some of the common criteria include age, income, credit score, employment history, and the value of the property. Most lenders require the borrower to be at least 21 years old and have a stable source of income.
Before applying for a home loan, it is essential to evaluate your repayment capacity and determine the loan amount you can comfortably repay. Many lenders offer online calculators to help borrowers determine their loan eligibility and the amount of the EMI they will have to pay.
The interest rates on home loans in India vary depending on the lender, loan amount, and loan tenure. Generally, interest rates on home loans in India range from 6.65% to 9%. It is important to compare the interest rates offered by different lenders and choose the one that suits your financial needs.
Additional fees and charges on home loan
The loan tenure for home loans in India ranges from 5 years to 30 years, depending on the lender and the borrower's repayment capacity. The longer the loan tenure, the lower the EMI, but the higher the overall interest paid. It is important to choose a loan tenure that suits your repayment capacity and financial goals.
In addition to interest rates, there are various other charges associated with home loans in India, such as processing fees, prepayment charges, and foreclosure charges. Processing fees are charged by lenders to cover the cost of processing the loan application. Prepayment charges are charged by lenders if the borrower chooses to prepay the loan before the end of the loan tenure. Foreclosure charges are charged by lenders if the borrower chooses to foreclose the loan before the end of the loan tenure.
In India, a home loan is a popular way for people to finance the purchase of their dream home. The process of availing a home loan in India involves several steps, including applying for the loan, submitting the required documents, and getting the loan sanctioned.
The Indian government offers various tax benefits on home loans, such as deduction on the principal amount repaid, deduction on the interest paid, and deduction on stamp duty and registration charges. These tax benefits can significantly reduce the overall cost of the home loan.
The lender possesses the legal rights to recover the outstanding loan amount by the sale of the property in question in case the borrower cannot repay the dues.
5 important terms about home loan
Here are five important terms related to home loans in India:
1. Equated Monthly Instalment (EMI): EMI refers to the fixed monthly payment that a borrower needs to make to repay their home loan. It comprises both the principal amount and the interest component, spread over the loan tenure. The EMI amount remains constant throughout the loan repayment period, although the interest and principal portions change over time.
2. Loan-to-Value (LTV) Ratio: The Loan-to-Value ratio is the proportion of the loan amount that a lender is willing to provide in relation to the property's appraised value. It represents the percentage of the property's value that can be financed through a home loan. The LTV ratio varies based on factors such as the borrower's creditworthiness, the property type, and the loan amount.
3. Fixed Interest Rate: A fixed interest rate is a type of home loan interest rate that remains constant throughout the loan tenure. It provides borrowers with certainty regarding their monthly repayment amounts, as the interest rate does not fluctuate with market conditions. However, fixed-rate home loans often have higher interest rates compared to floating-rate loans.
4. Prepayment: Prepayment refers to the option of repaying the home loan partially or in full before the scheduled tenure. Borrowers have the flexibility to make prepayments to reduce the outstanding principal amount, which can help save on interest costs and shorten the loan tenure. However, lenders may impose certain prepayment charges or penalties, so it's essential to review the terms and conditions before making prepayments.
5. Credit Score: A credit score is a numerical representation of a borrower's creditworthiness. It is calculated based on various factors such as repayment history, credit utilisation, length of credit history, and types of credit accounts. Lenders assess an individual's credit score to determine their eligibility for a home loan and the interest rate offered. A higher credit score indicates a lower credit risk and improves the chances of getting favourable loan terms.
These terms are crucial to understand when dealing with home loans in India and having a clear understanding of them can help borrowers make informed decisions about their home loan choices.
Use home loan EMI calculator to estimate monthly EMI
Using a home loan EMI calculator is an excellent way to estimate your monthly payment before applying for a loan. By entering details like loan amount, interest rate, and tenure, the calculator provides an accurate EMI breakdown. This tool helps in budgeting and ensures you can comfortably afford the loan. It also allows easy comparison of various loan offers, giving you a clearer picture of your financial commitment. Use this convenient tool to plan your repayments and make an informed decision about your home loan.
