Friday 30 March 2018

Home Loan- An opportunity


The mere mention of word ‘Home’ creates an inexplicable feeling in our mind, which is full of bliss, togetherness, celebrations, memories and cherished dreams. Everyone works hard to create a unique home in their special way, however, sometimes our efforts fall short and we need a helping hand. Home loans are quite useful in this situation and they are readily available. What is a home loan? Is it similar to other loans? Let us find out.

Home Loan
In simple words, home loan is the loan taken by a borrower from the bank against a property. The bank has been given conditional ownership of the property that means if the borrower fails to pay back the loan; the bank can salvage the loan money by selling that property. The period and EMI to pay back the lent amount varies according to the loan amount. Another thing that plays an important role in a home loan is the interest rate. Let us see some different types of interest rates.
  • Fixed Rate: The fixed interest is a rate that does not fluctuate during the loan period. It is convenient from the borrower’s point of view as s/he can predict her/his future payments.
  • Floating Rate: A floating interest rate or also known as the variable or adjustable rate is that rate which is not fixed at the time of the loan. It can be changed during the loan period.
  • Hybrid Rate: It is a blend of fixed rate and floating rate. This type has a fixed interest rate period that will be followed by a floating or adjustable interest rate. When the fixed rate gets expired, the interest rate will start to adjust on the basis of index plus margin.

Buying a home is a huge step, which may disturb your financial planning and overall life. However, a home loan can help you to bring financial stability in the long run. Let’s see how?
  • Better than renting a house – Your rent brings you nothing at the end whereas, EMIs bring you a house of your own.
  • Tax benefit – Home loans brings loads of tax benefits on the principle and interest paid to the banks.
  • Low-Interest rates – Home loans are long-term loans and the borrowers can always enjoy the benefit of low-interest rates.


Home loan with proper financial planning will give you financial stability in the future. Banks offer different types of loans according to the buyer’s necessity. Here are some different types of home loans.

1. Land purchase Loan
The land purchase loan is given for the purchase of a piece of land or property to the borrower who is looking to construct a house there. The banks lend 80-85% of the property price.

2. Home Purchase Loan
Home purchase loan is given by the financial bodies to purchase a residential property. The borrower can avail 80-85% of the market value of the property from the bank. You can choose the interest rate type, which can be fixed, floating or hybrid.

3. Home Construction Loan
If the applicant is constructing a home on the self-owned property, a loan can be issued considering the following factors.

· The plot should have been purchased within a year.

· The applicant should have a rough estimate of construction cost.

· If the cost of the plot is not included in the loan, then the estimation for construction is taken into account.

4. Home Extension Loan
Home extension loan is given for expanding the existing property. Some banks differentiate this loan based on the purpose of extension while some banks consider this as a part of home-improvement loans.

5. Home Improvement Loans
The home improvement loans are mostly for the renovation of the house and include painting, waterproofing, repairing in the existing house, electric wiring etc.

6. NRI Home Loans

This type of loan is for the non-resident Indians who wish to buy property in India. The procedure is similar to other loans except some documents are different.

Home loan is not a risk, but an opportunity to transform your dream home into a reality. Go ahead and take the first step towards what your heart desires.

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