As it is a huge investment that most individuals or families cannot afford without the help of banks or other financial institutions, it is important to know all about home loans before buying a home. A well-thought-out, well-researched work and research should be started from the basics like what is a home loan and other important home loan facts.
What
is home loan and housing?
A home
loan, also referred to as a home mortgage, is money you borrow from a Bank,
Home finance company and non-bank finance company to help you renovate
or repair your existing home, build, or buy a residential property
It is
a secured loan as the lender who extends the home loan retains ownership of the
property until the mortgage is paid in full. Depending on the borrower's gross
income, repayment capacity, age and credit score, the loans are available for
up to 30 years. Once you get a home loan, you must repay it in equal monthly
installments (EMIs).
What Are the types of Home Loans available?
it is
also important to know about different types of loans After knowing all about
home loan. Banks or financial institutions offer various types of loans to
borrowers to meet their specific needs.
The
interest rate depends on the type of loan you opt for along with other factors.
Before delving into the various types of home loan information, it is good to
know about the various purposes for which home loans are extended. Currently,
home loans are mostly available for the following purposes:
Types
of Home/Housing loan
To buy new home or apartment
banks or other financial companies lend money for buying a
new home, an apartment or a bungalow, or any re-sale property.
To construct/Build new home
You can get a loan to build a house on land that you own or
have some stake on it. And available to cover the cost of completing an
incomplete house.
To construct/Build new home and Buying a Plot
of Land
A mortgage can take to buy a plot of land and
construct a house on it.
Extension or construction of an addition to an
existing house
Loans can be taken from banks and other financial
institutions to meet the costs of home extension or expansion.
Reimbursement of Expenses incurred for
construction of a Home
If you have built a house with your own financial
resources, you can take a home loan to repay the expenses.
Home Improvement Loans
Renovation,
Refurbishment and repair work like exterior and interior repairs, painting,
overhead cistern construction and electrical repairs will make your home look
its best. But if you don't have funds for repairs and renovation, banks will
provide home improvement loans
Top-Up Loan
it is
a mortgage given by a bank or any other financial institution to its financing
option that is offered over and above the existing loan. Borrowers can use this
amount for any personal purpose. This loan is available when new customers
transfer their loan from another bank or financial institution.
Home loan with balance transfer
This option can be used when a person wants to transfer
their home loan from one bank to another for reasons such as lower interest
rates or better services from the other bank. This is done to pay off the
remaining loan at a lower interest rate offered by the other lender.
NRI Home Loans
Designed
exclusively for NRIs to purchase residential property in India, the formalities
and application procedures for this type of loan are different from others.
Generally, most private, and public sector banks offer NRI loans because of
their home loan portfolio.
Bridged Loans
Bridge
loans are short-term loans designed for existing homeowners who are planning to
purchase a new property. It helps borrowers to purchase a new home until the
buyer identifies the existing property. This type of loan usually requires a
new home mortgage with the bank and extends for less than two years.
Eligibility Criteria to take Home Purchase
Loans
An individual who wants to avail a home loan must fulfill
the following general criteria to be eligible for the loan. These criteria may
vary from lender to lender
|
|
Salaried Professionals |
Self-Employed Individuals |
|
Age |
18 – 65 years |
18 – 65 years |
|
Employment |
Min. 2 years of experience |
Min. 5 years of experience |
|
Credit Score |
750 or above |
750 or above |
Documents Required for Home Purchase Loan
Mentioned below are some of the common documents required
for a home loan. However, requirements may vary from lender to lender.
1. Age Proof (Birth Certificate, 10th Class Marks List
etc.)
2. Address proof (copy of passport, voter ID, utility bills
etc.)
3. Proof of Income (Salary slips and ITR Details)
4. Proof of Identity (PAN Card, Passport, Voter ID etc.)
5. Existing loan documents (if any)
6. Documents of the property to be purchased
Before
accepting the loan offer, you should carefully read the documents of the bank's
home finance scheme and clarify where necessary. Knowing everything about home
loan and how home loan works will save you from future problems. Also make sure
there are no hidden costs or prepayment penalties.
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