The Reserve Bank of India has reduced the benchmark interest rates (read MCLR or Marginal Cost of Lending Rate) to rarely-seen-before levels. As a result, home loan interest rates have dropped to their multi-year lows.
Availing of a home loan can be the most satisfying experience you have experienced in recent times. But, while all home loans are designed to let the borrower fulfil their dream of becoming a house owner, not every home loan is the best home loan in India.
Read on to learn about the different types of home loans in India to select the best for your needs.
What are the Characteristic Traits of the Best Home Loan in India?
Before finding the best home loan in India, you must know the features that differentiate such loans from other loans.
A home loan is good if it’s flexible. So, the best loan provides you with a repayment term between five (5) and thirty (30) years. Also, when you pre-close a home loan with a floating rate of interest, your lender will not charge a foreclosure fee.
Also, since home loans are secured loans, the documentation is minimal, and so is the eligibility. And a quick scan of the most popular loans in India would prove that home loan interest rates are the lowest loan rates in India.
A home loan EMI calculator can give you an idea of your net liability. Thankfully, most Indian lenders provide this calculator for free on their websites. You only need to enter the loan amount, interest rate, and tenor to get an estimate of the EMI amount before applying for a home loan.
Now that you know the characteristic traits of the best home loan in India, let’s look at the most popular home loan types in the following section.
Which are the Most Popular Home Loan Types in India?
Regular Home Loan
It is the most popular and the most common home loan type in India. Borrowers use this loan to buy residential properties, such as a villa, bungalows, or flats. You can use the loan amount to invest in an old or new property.
However, if the property is under construction, the lender will disburse the loan amount in installments based on the construction progress.
Regular home loan interest rates may be fixed or floating, and you have the liberty to select the one that suits your needs.
Home Construction Loan
If the idea of purchasing a fully constructed property does not elate you, a home construction loan is what you need.
A home construction loan allows you to design your home in the way you want. This loan is the best if you own a plot of land and wish to construct a house on the same plot. Also, if your plot of land is at least one year old, you may include the cost of the plot in your home loan.
The loan amount is generally up to 90% of the house construction cost.
Land Purchase Loan
A land purchase loan provides money for purchasing a plot of land. You can use the plot of land for house construction or as an investment.
Since land is a valuable commodity, people prefer buying one when the conditions are favourable. The amount required to purchase a plot of land is always lesser than constructing a house.
Also, if your loan amount is affordable, you may close it quickly to avail of a house construction loan.
Home Improvement or Renovation Loan
A home improvement loan enables you to renovate your house if it needs urgent repairs. You may use the loan amount for undertaking plumbing, electrical, or roofing work. You may also use it for painting the exteriors or interiors.
The loan amount of a home renovation loan is generally lesser than regular home loans or house construction loans.
Home Expansion Loan
A home expansion loan can come to your rescue if you want to extend your property by adding floor(s), reconstructing an unfinished room, or constructing a toilet or lavatory.
The loan amount of a home expansion loan is generally lesser than regular home loans.
Home loans have rarely been as lucrative as they are now, a factor justifying the spurt in demand in the real estate industry. The best home loan is one that provides unparalleled flexibility and excellent features. Look for these and use a home loan EMI calculator to estimate your liabilities before applying for a home loan.