2 min read
25 May 2021

When you are considering buying a home or funding home-related requirements, it makes sense to consider applying for a loan. After all, a loan is one of the best options considering the flexibility and affordability it offers. But, taking a loan as per your specific needs is what counts. Check the tenure, loan amount, value-added features, and then choose one of the types of home loans that aligns with your requirements perfectly This way, you can make your borrowing experience easier on your pocket and more fulfilling too!

Different Types of Home Loans in India:

Home loan

A home loan is an obvious choice when you want to purchase a residential property. You can also use a home loan to construct a home on a piece of property that you already own. Furthermore, you can even buy land and build a home using one high-value home loan, or use it to re-build a home or renovate it. With benefits such as a top-up loan and an EMI holiday, this option is certainly a good one.

Home loan balance transfer

When interest rates drop, your existing home loan provider may not pass on the price benefit to you.
This helps you avail a lower interest rates well better add-on features such as a top-up loan. A home loan balance transfer is most profitable during the initial years of the tenor when the interest component of your EMI is the highest. When you carry out a transfer towards the end of the tenor, the benefits that you accrue are negligible. Instead of continuing with the existing loan, you can transfer it to a lender who is offering a more affordable home loan.

Additional Read: Home Loan Disbursement Process

Home construction loan

If you are looking for a loan to help you construct your dream home from scratch, a home construction loan is ideal. The disbursal of the loan amount may be in instalments, or in one chunk depending on the terms of the lender. It is essential to remember that when you take this loan, the amount is based on rough estimates of the cost of construction.

Land purchase loan

As the name suggests, a land purchase loan allows you to invest in land. So, if you are getting a good deal, you can take this loan and make a valuable investment. You can then choose to construct on the land, as when you have the funds available to do so, or when you feel the need to. Besides, you can choose to purchase just the land without any intention of building on it.

There are also other types of home loans such as NRI home loans, stamp duty loans, bridge loans, home conversion loans and house expansion or extension loans that you can consider. In fact, it is best to evaluate all these options before selecting one. Also, be sure to use a home loan EMI calculator to judge the affordability of the loan beforehand and to plan repayment.

Additional Read: RBI Guidelines For Home Loans

Joint home loan

Home loans taken by two or more borrowers are termed as joint home loans. The co-applicants can be your parents, siblings, or spouse. Co-applicants availing joint home loans can also avail income tax benefits. However, they have to be co-borrower of the loan and co-owner of the property.

Every joint applicant who is a co-owner is eligible to claim income tax exemptions for principal repayments and interest payments under Section 80C and 24(b). The maximum exemption under Section 80C is Rs. 1.5 Lakh whereas, Section 24(b) allows a maximum deduction of up to Rs. 2 Lakh.

No tax benefit is available for properties under construction. Although, deductions of loan repayments made during this phase can be claimed in 5 equal installments from the year of completion of the construction.

Top-up loan

A top-up loan is available when you opt for a balance transfer facility. Top-up loans enable you to access funds over and above your existing home loan by up to Rs. 1 crore* or higher. You can use the funds for any purpose be it for higher education, wedding, debt consolidation, home renovation, etc.

Top-up loans can also provide income tax benefits under certain specific circumstances. You can claim deductions on payment of loan interest under Section 80E if you use it to fund higher education expenses. Similarly, you can avail exemptions up to Rs. 30,000 under Section 24(b) on the loan interest paid if you use the loan for home renovation.

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