What are The Different Types of Home Loans?

Are you planning to buy a house or a plot? Or are you planning to renovate your existing house?   because there are different types of Home Loans designed to serve different purposes. You have home construction loan, plot loan, home purchase loan, home renovation loan, and many more. In this blog, we have explained different types of housing loans available in India so that you make the right choice. 

Types of Home Loans

1. Home Purchase Loan

It’s the most common type of home loan that banks and NBFCs (Non-Banking Financial Companies) offer. You can use the loan amount to purchase your dream home or flat. The bank disburses the loan in full and you repay the loan in instalments, in the form of EMIs. 

If eligible, you can get up to 80% to 90% financing of the property price. For example, with Ujjivan SFB, you can get home loan up to ₹75 lakh. The tenure is usually up to 20 years or 240 months but may change based on your eligibility.

2. Home Construction Loan

Building your dream home from scratch requires careful financial planning. Home construction loans are specifically designed to finance the construction of a new house on an existing plot that you own. These loans provide funds in tranches as the construction progresses. The lender disburses the loan amount in instalments known as "construction-linked payments."

Example:
Let's say you plan to construct a house that will cost ₹60 lakhs. The lender agrees to finance 80% of the project cost, which amounts to ₹48 lakhs. The loan will be disbursed in stages based on the construction milestones achieved.

3. Home Renovation Loans

Your existing home may need repairs or renovations to enhance its value or meet your changing needs. Home renovation loans can help finance these improvements. These loans allow you to borrow money to renovate your kitchen, bathroom, or any other part of your home. 

The loan amount is typically based on the estimated cost of renovations. With Ujjivan, you can get a Home Improvement Loan up to ₹25 lakh at affordable rates. The tenure is usually up to 15 years. 

Example:
Suppose you want to renovate your kitchen and estimate the cost to be around ₹5 lakhs. You can apply for a home renovation loan for this specific purpose.

4. Home Extension Loans

If you need extra space in your existing home due to a growing family or other reasons, a home extension loan can provide the necessary funds. These loans allow you to extend your house by adding additional rooms or floors. The loan amount is determined based on the estimated cost of the extension project.

Example:
Suppose you want to add an extra floor to your house, and the estimated cost is ₹20 lakhs. You can apply for a home extension loan to cover this expense.

5. Plot Loans and Loans for Self-Construction of House

Planning to purchase a plot of land to build your dream home? A plot loan can help you finance the purchase of vacant land. These loans are specifically designed for buying non-agricultural land in approved areas. The loan amount is usually a percentage of the plot's value. With Ujjivan Small Finance Bank, you can get a plot loan up to ₹50 lakh at affordable rates.

6. Home Equity Loan

Though not considered as a traditional home loan, a home equity loan allows you to borrow money against the equity of your home. You can avail a home equity loan only against completely constructed properties. Also, you can use a home equity loan for debt consolidation, meaning instead of managing multiple loans, you can use the amount to consolidate your existing debts under one roof.

7. NRI Home Loans

Non-Resident Indians (NRIs) looking to invest in Indian real estate have access to NRI home loans. These loans are designed exclusively for NRIs and Persons of Indian Origin (PIOs). They come with specific eligibility criteria and documentation requirements.

8. Commercial Property Purchase Loan

Looking to purchase a commercial space for your business? You can opt for commercial property loans – loans specifically designed to realise your aspirations. With Ujjivan SFB, you can get Commercial Property Loan up to ₹30 lakh. 

9. Joint Home Loans

If you're unable to qualify for a home loan individually, you can consider applying for a joint home loan with a co-borrower. Joint loans allow you to include the income and creditworthiness of the co-borrower, increasing your chances of loan approval. This is especially beneficial for couples or family members buying a property together.

Example:
Suppose you and your spouse plan to buy a house, but individually, your income may not meet the lender's eligibility criteria. By applying for a joint loan, you can combine your incomes and improve your chances of loan approval.

10. Home Loan Balance Transfer

If you already have a home loan with one bank and find another bank offering better interest rates or terms, you may consider a balance transfer loan. This involves transferring your existing loan to the new bank, potentially reducing your EMIs or loan tenure.

11. Pre-Qualified Top Up Home Loan

If you have an existing home loan and need additional funds for various purposes, a pre-qualified top-up loan can provide you with the required funds without the need for additional documentation or verification. Top-up Home Loans don’t come with end-use restrictions, meaning you can use the loan amount for any financial purpose. With Ujjivan, you can get Pre-Qualified Top-Up Loan up to ₹30 lakh.

Factors to Consider When Choosing a Home Loan

When deciding between different types of home loans, there are several factors you should consider:

• Loan Purpose: Decide whether you need a loan for renovating your existing home,  purchasing a house, buying a plot or constructing a house in an existing plot. Apply for the loan that meets your requirement.
• Know Your Eligibility: Check your home loan eligibility before applying. This will give you an idea how much loan you’re eligible for. You can check your home loan eligibility with the help of an online home loan eligibility calculator.
• Check Interest Rate: Your home loan EMI is based on the principal amount and the applicable interest rate. Try to find out the interest rate you’re eligible for. Calculate your home loan EMI with the help of a home loan EMI calculator. Then evaluate your potential EMI obligations against your repayment capacity. This would help you plan your finances better.
• Loan Tenure: Determine how long you are comfortable repaying your loan. Shorter loan tenures result in higher EMIs but lower overall interest payments.
• Down Payment: Consider how much you can afford to put towards a down payment as it affects your loan amount and monthly payments.
• Loan Processing Fees: Processing fee is an upfront one-time fee you need to pay at the time of loan disbursal. The amount is deducted from the approved amount at the time of disbursal. Take into account any processing fees associated with the loan, as they can add to the overall cost.