All You Would Like To Understand About a Home Loan

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Recent research suggests that the Indian home loan market will grow at a CAGR of around 22% during 2021-to 2026. This development is fuelled by low-interest rates, attractive schemes from lenders, minimal documentation, monetary measures, and several government policies. 

Nevertheless, individuals wondering what is home loan, is can read below the following pointers. These include the features, benefits, and importance of taking a home loan. 

Features of a home loan 

Below mentioned are some notable features of a home loan: 

  1. Longer repayment tenor 

The repayment tenor of a home loan is typically 15 to 20 years. However, in some cases, it may extend beyond that. This makes paying the EMI affordable, and repaying the amount becomes a hassle-free affair. Hence, individuals must choose their home loan tenor keeping this pointer in mind. 

  1. Tax deductions 

One of the primary features of home loans is the availability of tax deductions. Individuals can avail certain home loan tax benefits under Section 80C and Section 24B. The former allows one to enjoy principal repayment benefits, whereas the latter comes under interest repayment benefits. 

  1. Attractive interest rate 

As a home loan is a secured loan, offering a competitive interest rate. Besides, the RBI’s decision to keep the repo rate unchanged at 4% has further led to the reduction in the home loan rate. This has made this financial product more affordable. 

However, one must be wary that there are three types of interest rates: fixed, floating and mixed. One should choose the interest rate after considering the loan amount. 

  1. Grow your capital 

Many individuals might have the option to buy their homes without opting for a home loan. However, it is not advisable to do that. One may not know when an unavoidable circumstance may arise, and hence, it is not wise to invest a considerable sum of capital while purchasing a home. 

  1. Improves credit score 

Individuals who pay off their monthly instalments timely on their home loans have better chances of improving their credit score. Moreover, with a good credit score, one can purchase other financial credits effortlessly. 

Types of home loan 

Besides knowing what is a home loan, it is essential to understand the types of home loans. Here are some of the different kinds of housing loans that can opt for in India: 

  1. Home-purchase loan 

Borrowers can avail a home purchase loan to buy residential flats, houses and bungalows. One can get up to 80-85% of the property’s market value if they opt for this financing option. 

  1. Loan for land purchase 

This type of loan is given to borrowers who want to purchase land, irrespective of their intention. However, the lenders may sanction up to 80-85% of the property’s market value, and a borrower must bear the rest 15-20%. 

  1. Home construction loan 

Home construction loans are designed for those individuals who wish to construct a home on the land they own\co-own. In this case, the amount of loan that the financial institution can sanction will depend upon a rough estimate of home construction. 

  1. Home renovation loan 

Borrowers can opt for this loan if they wish to renovate their homes. Although many lenders provide this loan, this has a much shorter tenor. 

  1. Home conversion loan 

Individuals with an existing property but wish to sell and avail a new one can opt for this loan. Borrowers have the option of transferring their loan to the new house. However, one must note that this is an expensive option. 

How to apply for a home loan? 

Applicants can apply for home loan through the online mode. One must follow the below-mentioned steps: 

Step 1: Fill up the application form. One must provide essential details, such as their name, employment status, income etc. 

Step 2: After a security fee is paid, a relationship manager will contact you. They will verify the documents and check whether you meet the eligibility criteria. 

Step 3: Submit the form online. 

Furthermore, selected financial institutions also extend pre-approved offers that expedite and simplify loan processing. These are available on a host of financial products, such as home loans, loans against property etc. Enter your name and contact number to check your pre-approved offer. 

Hence, after knowing what a home loan is and its features, individuals must select the type of home loan per their requirements after careful consideration. 

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