What Are The Types Of Home Loans Available In India And Which One Should You Opt For?

Rising real estate prices in India have led to a surge in the demand for home loans. To fulfil their dream of owning a home, people often go to any length to secure a loan, regardless of the cost. However, choosing amongst the right types of home loans based on your needs is vital to avoid needless costs, as each loan category has different cost structures, interest rates, and repayment policies. Also Read: What Is Gruha Lakshmi Scheme And Where Is It Implemented? All You Need To Know Some of the popular loans lenders provide include:

1. Loan to Purchase a House

A home loan is popularly used to purchase a residential property in India.In this type of loan, the lender provides the funds to purchase a property based on its market value, while the borrower repays the amount in equated monthly instalments over the long term. Typically they provide 80-90 per cent of the property value, subject to meeting the eligibility criteria.

2. Loan for Home Construction

A home construction loan allows you to build your dream home on your existing land. Unlike loans for home purchase, which the borrower receives in a lump sum payment, home construction loans are typically disbursed in instalments based on the project’s progress.The approved amount is generally based on the estimated construction cost.

3. Loan for Home Extension or Improvement

Home extension or home improvement loans are popular options for adding rooms or floors to an existing home. Depending on the lender, these loans can be costliercompared to a home loan. These loans allow access to vital funds necessary extend or renovate an existing structure.

4. Home Loan Balance Transfer

If you have already taken a home loan and are currently repaying it, you can switch to a different lender for a lower interest rate. However, before doing so, consider the actual savings on the loan as the new lender may demand processing fees and other charges.  Also Read: 5 Ways To Tackle Memory Loss In Senior Citizens; Here’s What Expert Says

5. Pradhan Mantri Awas Yojana

It is credit-linked subsidy scheme under the government’s Pradhan Mantri Awas Yojana (PMAY)initiative to financially support first-time homeowners.It provides home loans at subsidised interest rates, or savingsof up to Rs 2.67 lakh. The scheme also provides longer loan tenures of up to 20 years compared to normal home loans. Only the designated registered banks can offer the PMAY loans.So, if you are a first-time homebuyer,you can consider this loan.

6. Reverse Mortgage

A reverse mortgage is a financial product designed for senior citizens.It allows them to secure a loan based on the property’s value without requiring them to pay EMIs for lifetime, provided they live in the same house. However, if they want to move to another property, they can sell the property and repay the loan. Alternatively, they can handover the property to the lender and be free from all liabilities. Usually, the loan amount is provided at predefined periods.   If the borrower passes away, the legal heirs can sell the house and repay or hand it over to the lender. The reverse mortgage loans are available only to individuals aged 60 and above.