What is Home Loan?
A home loan is an amount of money that an individual borrows from a bank or money lending company at a certain rate of interest to be paid with the EMI every month. The property is taken as a security by the money lending company for the Home Loan.
The property can either be commercial or personal in nature.
When the borrower cannot pay the dues, the lender will possess all the legal rights to recover the outstanding loan amount by sale of the property in question.
types of home loan
Lenders offer home loans, not only for buying a house but also for a variety of other purposes. Some of the popular types of home loans available in the financial market are described below.
With home loans becoming the norm of the day when it comes to purchasing a home, it also becomes equally important to identify your requirement and apply for the right type of home loan. Not only will it reduce the paperwork and simplify the loan approval process, it will also allow you to enjoy a loan at reduced interest rates. Also, make sure you use an home loan EMI calculator to know your amortization schedule and plan the finances bette
Loans for Purchase of Land
The most popular type of home loan is the loan for purchase of a new or a pre-owned home. This loan is also commonly available and is offered by many banks in different variants. The interest rate is either floating or fixed and generally ranges anywhere between 9.85% and 11.25%. Also, 85% of the total amount is offered as a loan by many banks.
House Expansion or Extension Loans
Want another balcony or an additional bedroom? No worries, some banks also offer loans for house expansion including alteration of current structure and construction of new rooms.
Loans for Construction of a House
This loan is specially designed for people who want to construct a place according to their wishes rather than buying a pre-constructed house. The approval process for this type of loan is different for it takes into account the cost of plot also. The most important clause when applying for a home construction loan is that the plot must have been purchased within a year for the plot cost also to be included in the loan amount. The loan amount is decided based on a rough estimate of the construction cost. The amount may be disbursed at one go or in multiple installments.
Home Conversion Loans
People who have already availed a home loan and have purchased a house with it but want to move to a new house can opt for home conversion loans. By transferring the current loan to new house, borrowers can fund the purchase of the new home and also need not repay the previous home loan. Though it offers convenience, this segment of home loan is also very expensive.
Loans for Home Improvement
Renovation and repair works like external and internal repair, painting, construction of overhead water tank and electrical renovation certainly will make your house look better. But if you lack the finances for repair and renovation, banks like Union Bank of India, ICICI Bank and Vijaya Bank offer specialized home improvement loans.
Balance Transfer Home Loans
This option can be availed when an individual wants to transfer his home loan from one bank to another bank owing to reasons like lower interest rates or better services offered by the other bank. This is done to repay the remaining loan at a revised, lower interest rates offered by the other lender.
Stamp Duty Loans
Not a widely known segment of home loans, stamp duty loans are offered to cover the stamp duty charges during the purchase of a property.
NRI Home Loans
Specially designed to support non-resident Indians in buying a residential property in India, the formalities and application procedure for this type of loan is different from the others. Generally, most of the private and public sector banks offer NRI loans as a product of their housing loan portfolio.
Bridged Loans are short term loans that are designed for existing homeowners who are planning to purchase a new property. It aids borrowers to fund the purchase of new house until a buyer is identified for the existing property. This type of loan usually requires the mortgage of new house with the bank and is extended for less than two years. Several banks like Vijaya bank and HDFC Bank offer bridged loans.
Home Loan Eligibility
- Resident Type
- Net Annual Income
- Credit score
Minimum Age: 18 years and Maximum Age: 70 years
The applicant must be (any one):
Non-Resident India (NRI)
Person of Indian Origin (PIO)
The applicant can be (any one):
At least Rs.5-6 lakh depending on the type of employment
The applicant must have (any one):
A permanent residence
A rented residence where he/she has resided for at least a year prior to applying for a loan
A good credit score of at least 750 or more obtained from a recognised credit bureau
Home Loan Documents Required
Identity Proof (any ):
Residence Proof (any )
Copy of Electricity Bill/Water Bill/Telephone Bill
Copy of valid Passport/Aadhar Card/Driving License
Employer Identity Card
Duly filled loan application form affixed with 3 passport size photographs
Loan account statement for the previous 12 months if the applicant has any other ongoing loan from other banks/financial institutions
Bank account statements for all the bank accounts owned by the applicant for the last six month
Income Proof Documents
For Self-employed Applicant/Co-applicant
Income Tax Returns for the last 3 years
Certificate of Qualification (for Doctors/C.A. and other professionals)
Balance Sheet audited by a certified C.A and Profit and Loss account for the previous 3 years
Business License Details
Business address proof
For Salaried Applicant/Co-applicant:
Salary Slips for the last three months
Copy of Form 16 or Income Tax Returns for the last two years
Documents Required from all Non-Resident Indians (NRIs) Applicants
Identity Proof (any one)
Voter ID Card
Residence Proof (any one)
Piped Gas bill
Attested copy of the applicant’s/co-applicants’/guarantor’s valid passport and visa
Proof of residence indicating the applicant’s current overseas address
Employer Identity Card
If the applicant is employed in the Merchant Navy, the applicant is required to submit a copy of Continuous Discharge Certificate (CDC)
PIO Card issued by the Government of India in case the applicant/co-applicant is a Person of Indian Origin (PIO).
The completed loan application form duly filled with three passport size photographs of the applicant and co-applicants.
The attestation of the documents can be done by: 1. Indian Embassy/Consulate 2. Overseas Notary Public 3. FOs/Representative Offices 4. Officials of Branch/Sourcing Units based in India