Different Types of Home Loans In India

Everyone dreams of having a house of their own. Different types of home loans in India provided by most banks and a number of home finance companies enable many people to make their dreams come true. Some people may not want a home loan but look forward to obtaining financial support either to renovate their houses, buy a piece of land, or expand their current homes. All that you have to these days is do a little bit of research and pick a deal that best suits your specific needs. The aim of this post is to provide you with some information about the various types of home loans in India today.

Types of Home Loans In India:

In the housing finance market sector in India, loans are available to individuals for various purposes as follows:

#1: Land Purchase Loan:

Housing finance companies and banks provide loans for purchasing a piece of land or a plot for constructing your house. You can get up to 85 percent of the cost of the property as a loan. The repayment term of the loan can go up to a maximum of 15 years. However, the term is decided on the basis of your age of retirement. Anyone above 21 years of age with a regular monthly income is eligible to apply for the land purchase loan. The lender charges a processing fee of 1 to 2 percent when providing the loan.

Documents to be provided:

By salaried people:

• Photograph

• Identity Proof

• Address Proof

• Form 16

• Latest Salary Slip

• Last six months bank statement

By self-employed people and businessmen:

• Photograph

• Identity Proof

• Address Proof

• Last three years’ income statement, balance sheet, and income tax returns

• Educational qualification

• Proof of business

• Business Profile

#2: House Purchase Loan:

Home purchase loan is the most commonly sought after home finance product. You can use this loan to buy either a new house or an existing one. As in the case of purchase of land, you can get up to 85 percent of the value of the property as a loan. When it comes to the interest rate applicable for the home purchase loan, you have three options: fixed, floating, or hybrid rate of interest. Salaried and self-employed individuals between 18 years to 70 years and 21 years to 70 years and with an annual income Rs. 1.20 lakhs and Rs. 2.00 lakhs, respectively, are eligible to apply for this loan.

Documents to be provided by all applicants:

• Loan application form duly filled in

• Three passport-size photographs

• Identity proof

• Current address proof

• Last six months bank statement

• Declaration of personal assets and liabilities

• Proof of property

• Income Tax Proof (as applicable)

• Signature identification by present banker

Documents to be provided by the guarantor:

• Statement of assets and liabilities

• Two passport-size photographs

• Identity proof

• Address proof

• Signature identification by present banker

#3: Home Construction Loan :

Loans are available from banks for the construction of a house on a piece of land or plot that you own. If you have acquired the land where you are planning to construct your house within a year of construction, then the cost of the land will be considered when computing the total cost of the house. This is not applicable if the land was purchased over a year ago prior to the start of construction. You can file your loan application after estimating the amount required for the construction of the house. You can get up to 85 percent of the total cost as a loan. The loan may be disbursed as a lump sum amount or in instalments based on the progress of the construction work.

Documents to be provided:

By Salaried Individuals:

• Loan application form duly filled in

• Identity proof

• Address proof

• Proof of income

• Last six months’ bank statement

• Passport size photograph

• Own contribution proof

• Land title deed

• No encumbrance certificate

• Approved plan copy

• Estimate by civil engineer/architect

By Self-employed people and business owners:

• Photograph

• Identity Proof

• Address Proof

• Last three years’ income statement, balance sheet, and income tax returns

• Last 6 months’ current and savings accounts statements

• Proof of business

• Business Profile

• Own contribution proof

• Land title deed

• No encumbrance certificate

• Approved plan copy

• Estimate by civil engineer/architect

#4: Home Extension Loan

Home extension loans come in handy when you want to add some extra space. You may construct new rooms, enclose balcony, expand your bathroom, or remodel some of the rooms. Generally, banks provide funds to the tune of 70 to 85 percent of the estimated value of the extension work. Your age, creditworthiness, repayment capacity, and credit history are taken into account prior to sanctioning the loan. You may opt for fixed or floating interest rate.

Documents to be provided:

By salaried individuals:

• Loan application form duly filled in

• Identity proof

• Address proof

• Photograph

• Last six months’ bank statement

• Form 16

• Latest salary slip

By self-employed and businessman:

• Loan application form duly filled in

• Identity proof

• Residence proof

• Photograph

• Last three years’ income statement, balance sheet, and income tax returns

• Educational qualification

• Proof of business and business profile

#5: NRI Home Loan:

Non-Resident Indians who want to own a property in their home country can apply for an NRI home loan. Apart from the extensive paperwork involved, other formalities to be completed remains the same.

#6: Home Improvement Loan:

If you already own a home but do not have enough funds for renovation. You can make use of this home loan variant to do internal/external painting, repair work, waterproofing, electrical work, construction of underground/overhead water tank, etc.

#7: Home Conversion Loan:

If you have bought a house through a home loan but want to purchase and move into another house, you can apply for a home conversion loan. You just have to transfer your existing loan to the new home. You are not required to repay the existing loan. A home conversion loan carries a higher interest rate.

#8: Balance Transfer Loan:

You may opt for a balance transfer loan when you want to transfer your home loan from your current bank to another. Typically, you can do this to take advantage of the decline in home loan interest rates.

#9: Stamp Duty Payment Loan:

A loan for the payment of stamp duty charges, as applicable, on a property that you have purchased, can be availed from banks.

Apart from the home loan types explained above, banks extend short-term (less than two years) loans known as bridge loans to homeowners that want to buy a new one. Major Indian banks and finance companies that provide include the SBI, ICICI, HDFC Bank, Axis Bank, Bank of Baroda, HDFC, etc.

For more on types of home loan, do checkout our extensive home loan guide for first time home buyers in India.

Hope you found this article on ‘Types Of Home Loans In India’ helpful. If you are looking to buy property at prime locations in Kerala or Bangalore, then feel free to get in touch with our expert real estate property advisors. Also, avail interest subsidy of up to 2.67 lakhs on eligible projects under the PMAY scheme.