Different home loan types
A home loan is a type of loan offered by banks, financial institutions, and non-banking financial companies (NBFCs) to help individuals purchase a residential property in India. Home loans provide the necessary financial assistance to people who want to buy a house but cannot afford to pay the entire cost upfront.
In India, different types of home loans have become increasingly popular in recent years due to the rising cost of property and the growing demand for affordable housing. There are different types of home loan available for various purposes, such as purchasing a new or resale property, constructing a new property, renovating an existing property, or extending an existing property.
Understand different types of home loan
- Home loan balance transfer
Transfer an existing home loan to Bajaj Finserv with a home loan balance transfer. Enjoy competitive interest rates, a top-up loan, long tenor, and more.
- Top-up loan
Get a top-up loan in addition to your home loan and use the high-value amount for weddings, urgent medical procedures, education expenses, or however you deem fit.
- Pradhan Mantri Awas Yojana Home Loan
Should you qualify, take a Bajaj Finserv Home Loan under the Pradhan Mantri Awas Yojana scheme, and enjoy a maximum subsidy of 6.5% on the interest rate.
- Joint home loans
Make a home loan more affordable by opting for a joint home loan with a spouse, sibling ,or parent. Here, both co-applicants share repayment responsibilities equally.
- Women’s home loan
A home loan for women offers ample funds at a competitive rate so that women can be independent homeowners and build their asset portfolios.
- Home Loan for Home Construction
As the name suggests, a home construction loan is ideal for those who are constructing a home on a piece of land. It comes with a top-up loan to cover decorating costs once construction is complete.
- Plot for purchase
Buy a plot of land in a city of your choice with easy financing from a loan for land purchase.
Understand Different Types of Home Loan
A Standard Home Loan
A standard home loan is the most common type of housing loan available to salaried and self-employed individuals. It helps borrowers purchase a new or resale property. The loan amount is determined based on income, credit score, and repayment capacity, with flexible repayment tenures and competitive interest rates.
NRI Home Loans
NRI home loans are specially designed for Non-Resident Indians (NRIs) who wish to buy property in India. These loans come with specific eligibility criteria, including income proof from abroad and an NRI bank account. Borrowers must repay through Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts and comply with RBI guidelines.
Different Types of Home Loans based on Profession
- Home loan for private employees
Bajaj Finance offers home loans for private sector employees, making homeownership more accessible than ever.
Private sector employees interested in home loans should start by assessing their eligibility and conducting thorough research on lenders and loan products. Comparing interest rates, processing fees, and repayment options is essential. Additionally, it is beneficial to seek pre-approval to understand the loan amount you qualify for and to gain a competitive edge in the real estate market.
- Home loan for government employees
If you are a government employee, you can choose Bajaj Finance Home Loan for government employees and avail of loan up to Rs. 15 crore*. The loan comes with a flexible tenure of up to 32 years and has an attractive rate of interest.
- Home loan for bank employees
Bank employees can choose home loan for bank employees from Bajaj Finance and avail of benefits like low interest rates, flexible repayment tenure, balance transfer facility with top-up loan.
- Home loan for advocates
Bajaj Finance offers home loan at an attractive interest rate starting from 7.99%* p.a.. If you are an advocate planning to opt for a home loan, Bajaj Finance can be a good option.
Factors to consider when applying for different types of home loans
- CIBIL Score: Maintaining a good CIBIL Score is crucial when applying for any type of home loan. Lenders use this score to assess an applicant's creditworthiness. A higher score increases the chances of loan approval and may result in better interest rates. Regularly checking and improving your CIBIL score can positively impact your loan application process.
- Total loan amount: Consider your financial capability and the total loan amount required. Assessing your repayment capacity helps in determining the appropriate loan amount. Avoid borrowing excessively as it may lead to financial strain. Calculating the total cost of the loan including interest can aid in making an informed decision.
- Fixed interest rates: Choosing between fixed and floating interest rates depends on your risk tolerance and market conditions. Fixed rates offer stability as the interest remains constant throughout the loan tenure. However, they may be higher initially compared to floating rates. Evaluate your financial goals and market trends before opting for a fixed interest rate.
- Equated Monthly Instalments (EMI): EMI calculation is crucial for budgeting and planning loan repayments. Factors like loan amount, interest rate, and tenure determine the EMI amount. Use online calculators to estimate EMI and choose a repayment schedule that aligns with your financial situation. Ensure EMI payments are manageable to avoid defaults and financial stress.
- Repayment tenure: Selecting an appropriate repayment tenure is essential to manage loan obligations effectively. Longer tenures result in lower EMIs but higher overall interest payments. Shorter tenures lead to higher EMIs but lower interest costs. Assess your financial stability and opt for a tenure that balances affordability and interest savings.
- Calculate cost-to-benefit ratio: Analysing the cost-to-benefit ratio helps in evaluating the overall affordability and feasibility of the loan. Consider factors like processing fees, prepayment charges, and tax benefits alongside the loan benefits. Assessing these aspects enables you to make a well-informed decision and choose a home loan that suits your financial goals.
What is the difference between a loan and mortgage?
Types |
Loan |
Mortgage |
Nature of the Agreement: |
A loan agreement is a contract between a borrower and a lender outlining the terms and conditions of borrowing money. |
A mortgage agreement specifically pertains to financing real estate, where the property serves as collateral for the loan. |
Purpose: |
Loans can be used for various purposes such as personal expenses, education, or business investments. |
Mortgages are specifically designed to finance the purchase of real estate properties, including homes or commercial buildings. |
Collateral: |
Loans may or may not require collateral depending on the type and terms of the loan. |
Mortgages are secured loans where the property being financed serves as collateral for the loan. |
Interest Rates: |
Loan interest rates can vary based on factors like creditworthiness, market conditions, and the type of loan. |
Mortgage interest rates are typically lower than other types of loans due to the collateralization of the property. |
Loan Term: |
Loan terms can vary widely depending on the type of loan, ranging from short-term loans like payday loans to long-term loans like mortgages. |
Mortgage loans usually have longer terms, commonly ranging from 15 to 30 years, allowing borrowers to spread out payments over an extended period. |
Repayment Structure: |
Loan repayment structures vary depending on the type of loan, with options for fixed or variable interest rates and different repayment schedules. |
Mortgage repayments typically consist of monthly instalments covering both principal and interest, with the possibility of refinancing or prepayment options. |
Frequently asked questions
There is a diverse range of property home loans available to cater to varying financial needs. Fixed-rate mortgages maintain consistent interest rates, while adjustable-rate mortgages (ARM) offer initial lower rates that can change periodically. Interest-only mortgages enable interest payments initially, followed by principal and interest.
A home loan, also known as a mortgage, is a financial arrangement that enables individuals to purchase a home by borrowing money from a lender and repaying it over time. There are various types of home loans to suit different needs:
- Fixed-Rate Mortgage: Offers a stable interest rate for the entire loan term.
- Adjustable-Rate Mortgage (ARM): Starts with a fixed rate but can adjust periodically.
- Reverse Mortgage: Converts home equity into cash for older homeowners.
- Construction Loan: Funds new home construction, followed by a traditional mortgage.
- Home Equity Loan: Allows borrowing against existing home equity.
The choice of home loan should align with individual financial situations and homeownership goals.
In India, loans can be classified into four main categories:
- Personal Loans: Unsecured loans for various personal expenses.
- Home Loans: Secured loans for purchasing or constructing residential properties.
- Business Loans: Used by entrepreneurs and businesses for operations, expansion, or capital needs.
- Vehicle Loans: Secured loans for purchasing automobiles.
Additional specialised loan types are also available to meet specific financial requirements, such as education loans, gold loans, and agricultural loans, with eligibility criteria, interest rates, and terms that vary depending on the lender and loan type.
Taking a home loan from a private bank can be beneficial if it offers competitive interest rates and favorable terms. However, borrowers should carefully consider factors like interest rate fluctuations and repayment capabilities before committing.
Generally, banks offer up to 80-90% of the property's value as a home loan. Getting 100% financing is rare and often requires additional securities or a higher interest rate. Down payments are commonly required to cover the remaining percentage.
Eligibility for a Rs. 75 lakh home loan typically depends on factors like income, credit score, employment stability, and existing financial obligations. Lenders assess these criteria to determine the borrower's repayment capacity and risk profile.
Loans are broadly classified into secured, unsecured, revolving, and term loans:
- Secured Loans: Require collateral (e.g., home loans, car loans).
- Unsecured Loans: No collateral required (e.g., personal loans).
- Revolving Loans: Borrowers can withdraw up to a credit limit (e.g., credit cards).
- Term Loans: Fixed tenure and EMI (e.g., education loans).
The six common types of mortgages include:
- Fixed-Rate Mortgage (FRM) – Fixed interest rate for the loan tenure.
- Adjustable-Rate Mortgage (ARM) – Interest rate changes periodically.
- Interest-Only Mortgage – Pay interest initially, then principal.
- Reverse Mortgage – For senior citizens to convert home equity into income.
- Balloon Mortgage – Low initial payments, large final payment.
- FHA/VA Mortgages – Government-backed loans for eligible borrowers.
The fixed-rate home loan is the most common, where the interest rate remains constant throughout the loan tenure. It offers predictable EMI payments, making it a preferred choice for borrowers who want stability and long-term financial planning.
The two most common types of loans are:
- Secured Loans: These require collateral, such as home loans and car loans.
- Unsecured Loans: These do not require collateral, like personal loans and credit cards.
