Building your own home will allow you to see your dream materialise in reality, be it the exteriors, the interiors, the plumbing, or the greenery. Whether you want to build your dream home from scratch or make structural changes to your existing home to suit your needs, a home construction loan is the ideal solution for you. A construction loan is of three types, namely: construction to permanent, construction only, and a renovation construction loan. Despite their names being self-explanatory, it is always good to know these variants in detail before applying for the one you deem useful for you.
What is a construction-only loan?
This loan is a short-term home loan, which the lender offers to you solely for home building or modification purposes. The best part about this construction loan is that it is offered on similar interest compared to home loan rates. This loan finances the majority of your construction costs, but you will need to repay it once the construction is complete.
You can draw funds from your overall sanction in parts based on your construction needs. Further, you may be allowed to pay interest only on the amount you draw and not your entire sanction. This loan generally comes with contingency reserves, which you can make use of in case the project amounts to more than the estimated costs. All fees, plans and permits along with labour and materials costs are included in the construction loan too.
Construction loan for a new home
In case you are borrowing construction loan to fund the building of your new home then the loan will be disbursed to your contractor directly. The loan amount, upon sanction, is disbursed in parts to your developer or builder based on the stage of construction. The lender only allows installment disbursals on the loan to ensure that the construction is happening as promised. You have a much longer tenor to repay this loan, which converts to a regular home loan once the building is complete.
Construction loan for renovating an existing home
A construction loan for renovating or adding to an existing structure works in line to the construction loan you take to build a new home. When you apply for this loan, your lender will ask for the building plan and estimates for construction. Your lender will verify these details including the architectural details and cost, and then disburse the loan amount. Here too, the loan is only disbursed in parts and not all at once.
How to apply for a construction loan
The procedure to apply for a construction loan is similar to that of a home loan. Remember to use a home loan EMI calculator available on lender websites. This will give you a chance to choose affordable EMIs and a loan offering on comfortable terms. Bajaj Finserv for instance, offers you Home Construction Loan on nominal interest rates to perfectly suit your needs.
You can apply for this loan online following a few simple steps. All you need to do is fill out and submit a simple application form listing out all your basic details and construction requirements. You can also apply offline by messaging ‘HLCI’ to 9773633633. A representative will assist your further and to aid your convenience they will also arrange for a doorstep documents pickup.
Equipped with the knowledge of construction loans, follow the above steps to apply for a home construction loan now to fund all your building needs. Before you apply, do remember to check the home loan documents mentioned on lender website to prepare in advance and hasten the process.
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