Different home loan types
Thinking of buying a home, a piece of land, or planning to give your current house a fresh new look? There are different types of home loans available in India, and each one serves a specific need. Whether you're building a new house, buying a flat, purchasing a plot, or renovating your existing space, there’s a suitable loan option for you. These loans are structured to help you manage your finances without draining your savings. In this article, we will guide you through the main types of home loans offered by banks and financial institutions across India. Understanding these options will make it easier for you to choose the right kind of loan based on your plans, eligibility, and financial goals. Let’s get started.
Understand different types of home loans in India
Buying property is a big financial decision, and with prices rising every year, it may not be easy to afford it on your own. That’s where a home loan can help. Depending on your needs, you can apply for a loan to purchase a ready-to-move-in flat, build a home on your own plot, or even buy the land first. Financial institutions offer different types of home loans, each tailored to suit a particular goal. These loans are designed to make property ownership possible and more manageable by breaking down payments over time. In the following sections, we’ll walk you through the most popular types of home loans offered by banks in India and explain how each can be used.
Balance transfer home loan
Transfer an existing home loan to Bajaj Finserv with a home loan balance transfer. Enjoy competitive interest rates starting from 7.60%* p.a., a top-up loan, long tenor, and more. You might already be eligible – check your offers now by entering your mobile number and verifying it with a one-time password.
Top-up home 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 construction/ renovation
If you're planning to build a home on your own land or upgrade your existing house, there are two main types of home loans that can help: home construction loans and home renovation loans. A construction loan is meant for those who already own a plot and wish to build a new house on it. Instead of giving you the entire amount upfront, banks release the funds in stages—called construction-linked disbursements—based on the progress of the building work. This ensures the money is used in line with the construction schedule.
Say your planned construction will cost around Rs. 60 lakh, and the bank agrees to finance 80% of it (Rs. 48 lakh). This amount will be given in instalments after the foundation, structure, and roofing are completed.
On the other hand, a renovation loan helps you improve or repair your current home. Whether you're remodelling a kitchen, repainting walls, or making structural upgrades, this loan covers the estimated renovation cost and comes with flexible repayment terms. So, if your kitchen renovation costs Rs. 5 lakh, you can apply for a loan to cover that amount.
Home loan for land or plot purchase
If your plan is to first buy land and then build a house on it later, a plot loan could be the right option. These loans help you buy non-agricultural land in areas approved by local authorities. Loans for land purchase are generally offered for residential use only and are ideal if you already have a long-term plan for construction. The loan amount is usually a percentage of the market value of the plot, and repayment tenures can go up to 15–20 years in many cases.
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.
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 7.49%* 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.
Important links: What is Home Loan | Home Loan Interest Rates | Home Loan Eligibility Criteria | Documents Required for Home Loan | Home Loan Balance Transfer | Joint Home Loan | Home Loan Tax Benefits | Home Loan Subsidy | Housing Loan Top Up | Rural Home Loans | Home Loan Process | Down Payment for Home Loan | Pre-approved Home Loan | Home Loan Tenure
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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.
