Home Loan Options in India

Garden city of India or the tranquil backwaters of Kerala, every corner of India resonates with tales of home ownership. Have you pictured yourself standing at the threshold of your dream abode?
Of course, we all have and mostly we have just been dreaming, confused more so than ever because of the rising prices and lack of resources that guide us right with facts and figures, terms and conditions that comes with the types of home loans we have.

The apartment you have been eying on because of the massive swimming pool or the empty site where weeds have grown, they all need money and you might be rich with hard cash but you don’t want the IT department knocking on your new house door, so, you are bound to take a loan but here is where we step in!

Why Credit Dharma? Because banks offer so many types of home loans. So, will you Inky Pinky Ponky and pick one? Naah!
But we can help you and before I get to that, let me explain the types of loans available, so you can pick one as per your situation.

Home Purchase Loan

Well, cue the drumroll for the MVP of home loans which is used to buy a residential property. It can be used to purchase both new and existing homes.
The amount you can score with this loan depends on a bunch of factors – think your income, credit score (fingers crossed it’s on point!), age, and of course, the value of the property you’re eyeing. So, it’s like a customized fit for you.
Repayment of the loan is usually done through equated monthly installments (EMIs) over a fixed tenure, which can range from a few years to several decades.
Don’t worry, no need to break a sweat about paying it all off in one go!

Home Construction Loan

So, you’re the architect of your dreams, ready to roll up your sleeves and build your dream home from the ground up? This bad boy is tailor-made for folks with a vision and a plot of land itching for a makeover. Here’s the scoop –
This is specifically designed for individuals who want to build a house on a plot of land they own.
The loan amount is disbursed in stages or tranches based on the progress of construction. This ensures that the borrower has funds available at each stage of the construction process.
Interest is typically charged only on the disbursed amount during the construction phase, and full repayment begins after the construction is completed.
Borrowers may need to provide detailed construction plans, estimates, and other documents to qualify for this loan.

Home Expansion/Extension loan

This loan isn’t just about buying a new place; it’s about pimping out your current digs. Do you want an extra room for the in-laws? Done. How about a sun-soaked balcony overlooking your backyard for your kids? You got it. This loan is your golden ticket to transforming your house into the ultimate sanctuary.
A home expansion or extension loan is used to finance the expansion or extension of an existing residential property.
This type of loan allows homeowners to add extra rooms, floors, or make structural modifications to their current home.
Similar to home construction loans, the loan amount may be disbursed in stages based on the progress of the expansion or extension work.

This loan isn’t about putting up walls or picking out paint colors; it’s all about claiming your piece of the earth.
A land purchase loan is specifically for buying a plot of land for residential purposes. It does not cover the construction of a house on the land.
Lenders may offer lower loan-to-value (LTV) ratios for land purchase loans compared to home purchase loans, meaning borrowers may need to provide a higher down payment.
The interest rates for land purchase loans may be slightly higher compared to home purchase loans due to the higher perceived risk for the lender.

NRI Homeloans

Picture this: If you’re living the dream abroad, but you’ve got your eye on a sweet spot back in your homeland, that’s where these loans come in handy. They’ve got their own set of rules, though.
NRI home loans are specialized financial products for Non-Resident Indians looking to purchase property in India. These loans have specific eligibility criteria and documentation requirements, including proof of income, employment, and overseas residency. Repayment is typically through NRE or NRO accounts, and loan terms vary based on factors like income and property value.

What factors should be considered while choosing the right home loan?

Now that I have given you so much gyaan on the types of loan, you are probably wondering what should you keep in mind before choosing a loan. Here are some factors –

Interest Rate

It will significantly affect your monthly payments and the total amount you repay over the loan tenure. Compare interest rates offered by different lenders and choose the one that offers the most competitive rate.

Loan Amount

Determine how much you need to borrow based on the property’s cost, your down payment, and additional expenses like registration fees, stamp duty, and processing fees.

Loan Tenure

Decide on the loan tenure that suits your financial situation. Longer tenures result in lower monthly payments but higher overall interest payments, while shorter tenures mean higher monthly payments but lower total interest costs.

EMI Affordability

Calculate your EMIs to ensure they fit comfortably within your budget. Make sure you have enough disposable income to cover other expenses and emergencies after paying your EMI.

Type Of Interest Rate

Choose between fixed-rate and floating-rate interest loans. Fixed-rate loans offer stable EMIs throughout the loan tenure, while floating-rate loans may fluctuate based on market conditions.

Prepayment and Foreclosure Charges

Check if the lender imposes any penalties for prepaying or foreclosing the loan. Opt for a loan with minimal or no prepayment charges if you anticipate making early repayments.

Eligibility Criteria

Understand the lender’s eligibility criteria regarding age, income, credit score, employment stability, and property type. Ensure you meet these criteria before applying for the loan.

Processing Fees and Other Charges

Consider the processing fees, administrative charges, legal fees, and any other fees associated with the loan. Factor these costs into your overall loan cost analysis.

Loan-to-Value Ratio (LTV)

Evaluate the LTV ratio offered by the lender, which determines the maximum percentage of the property’s value that can be financed through the loan. A higher LTV ratio may require additional collateral or mortgage insurance.

Loan Portability and Flexibility

Check if the lender offers features like loan portability, wherein you can transfer the loan to another property, or flexibility in terms of EMI payment options, loan restructuring, or top-up loans.

Customer Service and Reputation

Consider the lender’s reputation for customer service, responsiveness, and transparency. Read reviews, seek recommendations, and assess the lender’s track record before finalizing your decision.

Tax Benefits

Understand the tax benefits available on home loans, such as deductions on principal repayment under Section 80C of the Income Tax Act and interest payment deductions under Section 24(b). Factor in these benefits while calculating the overall cost of the loan.

Conclusion

Well, don’t thank me yet, if you got more clarity after reading this, then great but if all of this was overwhelming for you and you are still confused, then how about you talk to us?
We guarantee you, that you won’t talk to a bot, nor receive an automated chat, but talk to a real human who can help you understand all of these better. Sounds good?

Frequently Asked Questions