10 Types Of Home Loans Every Homebuyer Should Know

Buying a house is one of the most expensive affairs we take up in our life. With soaring property prices, it has become almost impossible to buy a house without availing a loan. A home loan not only provides the funds to buy a house at cheaper interest rates but also offers tax benefits making it an attractive proposition for home buyers.

In India, the demand for home loans has increased exponentially since the last decade. We are already aware about the banks which provide us loans for buying our new home. However, in this article we give you an insight on 10 types of loans to help the home buyers sail through all hurdles in the entire process of owning a home. Though these are different categories, they are collectively treated as 'Home Loans' for tax considerations allowing a maximum tax rebate upto Rs. 2 lac on the principal amount and upto Rs. 1.5 lacs on the interest paid.

1- Loan to purchase a plot

This type of loan is exclusively availed to purchase a land on which you would build your home. The interest rate on land loan is at par with home loan but you cannot claim tax deduction on the interest paid on such loans. Some banks offering land purchase loans are HDFC Bank, Axis Bank and ICICI Bank.

2- Home buying loan

This is what we commonly refer to as 'Home Loans'. Taken for buying a new residential property or a resale home, these loans can be availed either at fixed rates or floating rate of interest. The lender usually provides up to 85% of the property's market value and income tax deduction can be claimed on the interest paid on such loans. All leading banks and financial institutions provide such loans.

3- Loans for construction of home

If, instead of choosing a constructed house, you wish to build your own home, you can apply for a loan. You have to estimate the cost needed for construction and only after scrutinizing all aspects, the lender will take the decision to grant the loan. The cost of land will be considered in calculating the total price of the house, only if the land has been bought within a year. UCO Bank, Bank of Baroda and Canara Bank are some of the banks offering such loans.

4- Home Improvement Loans

If you already own a house but lack the funds to renovate it, you can avail for Home Improvement Loans. Renovations like construction of an overhead water tank, external and internal painting, major repairs, electrical renovation, etc. are included in this type. Some of the banks providing specialized home improvement loans are Union Bank of India, Vijaya Bank and ICICI Bank.

5- Home Expansion Loans

If you are planning for a home expansion like constructing a balcony or an extra floor, loans are offered by HDFC Bank, Bank of Baroda. Some banks include it in Home Improvement Loans while some take it as a separate category.

6- Home Conversion Loans

If you have already bought a house by availing a loan, but now wish to have a new home, you can opt for conversion loans. Under this scheme, you can fund the purchase of the new house by transferring the current loan to your new home. This type of loan is comparatively expensive and is provided by HDFC Bank.

7- NRI Home Loans

This is a specialized variant of home loans and is exclusively meant for Non-Resident Indians. It helps them in arranging finance to buy a home in India. All procedures involved are more or less same, leaving the documentation part which is bit elaborate. NRI's can avail Income tax benefits related to Home Loan, if they have an Indian income.

8- Stamp Duty Loans

If you find it burdensome to pay the stamp duty on your property purchase, you can apply for a loan. This type of loan is not popular in India.

9- Balance Transfer Loan

Is your current lender charging high interest rates? Are you not satisfied with the services of your lender bank? If yes, you can opt for a balance transfer loan wherein the loan is transferred from one bank to another bank. This facility is offered by ICICI Bank, Kotak Mahindra Bank and Deutsche Bank, etc.

10- Bridged Loan

If you already own a house and wish to buy a new one, you can take a bridged loan for a short term until a buyer is found for your old house. When your old house is sold you can repay the loan. In this case you have to mortgage your new house with the lender. Vijaya Bank, HDFC Bank, etc. offer bridged loans.

Banks provide Home Loans not only for buying houses, but for a variety of related purposes. So, before you apply for home loan you should know about the different types of home loans available in the Indian market.

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