For many, buying a house is a cherished dream and a significant milestone. Bringing this dream to life demands considerable effort, and one of the most effective ways to make it financially manageable is by opting for a home loan.
What is a home loan?
A home loan is a secured loan that is obtained to purchase a property by offering it as collateral. Home loans offer high-value funding at economical interest rates and for long tenures. They are repaid through EMIs. After repayment, the property’s title is transferred back to the borrower.
A home loan is a type of loan provided by banks, financial institutions, and Non-Banking Financial Companies (NBFCs) to help individuals purchase a residential property. In India, home loans have become increasingly popular in recent years, given the significant rise in property prices and the increasing demand for affordable housing.
Home loans are a long-term financial commitment and therefore require careful consideration before making a decision. In India, there are various types of home loans available, such as fixed-rate home loans, floating-rate home loans, and hybrid home loans.
Types of home loan based on the purpose
Basic home loan
A Basic Home Loan offers an affordable way to fulfil your homeownership dreams. With competitive interest rates, flexible repayment options, and personalised solutions, this loan is ideal for buying your first home or upgrading to a better one. Experience seamless processing and make your dream home a reality.
Home construction loan
Planning to build your dream home? A home construction loan is designed to fund construction costs, offering low-interest rates and flexible disbursement options. It ensures you have the finances to construct your home step by step, without compromising on quality or timelines. Build with confidence and ease.
Home renovation loan
Transform your living space with a home renovation loan. From modern interiors to essential repairs, this loan covers all renovation expenses. Enjoy attractive interest rates, easy approvals, and customized repayment terms to upgrade your home effortlessly, creating a comfortable and stylish environment for your family.
Home extension loan
Need more space in your home? A Home Extension Loan is the perfect solution to add rooms or expand your living area. With hassle-free disbursement, flexible tenures, and affordable rates, you can enhance your home’s functionality while staying within your budget.
Land purchase loan
Looking to buy a plot for your dream home? A land purchase loan provides the financial support you need to secure the perfect location. Enjoy competitive interest rates, flexible repayment terms, and quick approvals, making it easier to turn your vision into reality.
Home loan balance transfer
Reduce your financial burden with a home loan balance transfer. Transfer your existing loan to enjoy lower interest rates, reduced EMIs, and better terms. This option is perfect for saving on interest costs and improving cash flow while staying on track with your homeownership goals.
Joint home loan
Increase your home loan eligibility and share financial responsibilities with a joint home loan. Co-borrow with a family member or spouse, enjoy tax benefits, and access higher loan amounts. It's a practical solution for purchasing your dream home while sharing ownership and repayment duties.
Top-up home loan
Need extra funds for unexpected expenses or additional home projects? A top-up home loan allows you to borrow more on your existing home loan at affordable rates. It’s a convenient way to access extra funds without taking a separate loan.
If you are looking for a home loan, familiarise yourself with the tips to get your home loan approved instantly and then fill out the online home loan application form. In case of loan applications made offline, you can drop by at the nearest branch in your city or call us for more details.
Also Read: How to apply for a Home Loan?
Types of home loan based on the interest rate
Fixed-rate based home loan
A fixed-rate home loan is a loan where the interest rate remains the same throughout the loan tenure. This type of loan is preferred by those who want to avoid fluctuations in interest rates and prefer the stability of a fixed repayment amount.
Floating rate based home loan
On the other hand, floating-rate home loans have an interest rate that fluctuates based on market conditions. This type of loan is preferred by those who are willing to take on the risk of interest rate fluctuations in exchange for the possibility of lower interest rates.
Hybrid home loan
Hybrid home loans are a combination of fixed and floating interest rates, where the interest rate remains fixed for a certain period and then switches to a floating interest rate for the rest of the loan tenure. This type of loan is preferred by those who want the stability of a fixed interest rate for a certain period and then switch to a floating interest rate.
Eligibility criteria for home loans in India
You can apply for our home loan if you meet the eligibility criteria outlined below.
- Nationality: You must be an Indian citizen residing in India.
- Age: A salaried applicant must be between 23 years to 67 years, and a self-employed professional must be between 23 years to 70 years.
*The upper age limit is considered as the age at the time of loan maturity. - CIBIL Score: A CIBIL Score of 725 or higher is ideal to get a home loan.
- Occupation: Salaried employee, a professional individual, and a self-employed individual.
Additional fees and charges on home loan
Home loans in India typically have a tenure ranging from 5 to 30 years. The loan duration affects your monthly EMI (Equated Monthly Installment). A longer tenure means lower EMI, but you may end up paying more in total interest. It’s important to choose a loan tenure that fits your ability to repay and your financial goals.
Besides interest, there are other fees for home loans, such as:
- Processing fees: Lenders charge this to cover the cost of processing your loan application.
- Prepayment charges: These are applied if you repay the loan before the agreed term.
- Foreclosure charges: These are fees you may face if you decide to close the loan early.
Home loans are a popular option for purchasing a home in India. The process includes applying for the loan, submitting documents, and getting approval.
The Indian government also offers tax benefits on home loans. These include deductions for:
- The principal amount repaid
- The interest paid
- Stamp duty and registration charges
These tax savings can help lower the overall cost of your home loan.
If you are unable to repay the loan, the lender can sell the property to recover the outstanding amount.
List of important home loan terminologies
Here are five important terms related to home loans in India:
- Down payment: Lenders typically provide up to 90% of a property’s value as a home loan, leaving the remaining portion to be paid by the buyer. This personal contribution is referred to as the down payment.
- Floating interest rate: A floating interest rate fluctuates based on market conditions. If you choose this option, your home loan interest rate can increase or decrease during the loan tenor in alignment with market trends.
- Fixed interest rate: Fixed interest rates remain constant throughout the loan tenor, unaffected by market changes, unless the lender resets them at a predetermined interval.
- Tenure: The home loan tenure is the repayment period set by the lender. It includes both the principal and interest amounts and can extend up to 32 years, depending on the lender.
- Resale: Resale refers to purchasing a property from a previous owner rather than directly from a builder.
- Joint ownership: Joint ownership means a property is co-owned by two or more individuals, and all owners share the responsibility for loan repayment.
- Sanction letter: A sanction letter is a formal document from the lender confirming loan approval and outlining its terms and conditions. It serves as proof of eligibility and approval for the home loan.
- Collateral: Home loans are secured loans where the property being purchased serves as collateral. This security allows the lender to approve a large loan amount.
- Disbursement: Disbursement refers to the release of the loan amount by the lender after verifying the applicant's profile and documents. The funds can be disbursed in a single instalment or in parts, depending on the agreement.
- Loan-to-Value (LTV) ratio: The LTV ratio indicates the percentage of the property’s value a lender is willing to finance. It typically ranges from 70% to 90%, depending on the lender’s policy.
- Equated Monthly Instalments (EMIs): EMIs are fixed monthly payments that borrowers make to repay their loan. Each EMI includes a portion of the principal loan amount and the accrued interest.
- Foreclosure: Foreclosure occurs when a borrower repays the entire outstanding loan amount before the end of the agreed tenure. Borrowers with floating interest rate loans typically face no additional charges for foreclosure.
Use home loan EMI calculator to estimate monthly EMI
Using a home loan EMI calculator is an excellent way to estimate your monthly payment before applying for a loan. By entering details like loan amount, interest rate, and tenure, the calculator provides an accurate EMI breakdown. This tool helps in budgeting and ensures you can comfortably afford the loan. It also allows easy comparison of various loan offers, giving you a clearer picture of your financial commitment. Use this convenient tool to plan your repayments and make an informed decision about your home loan.
