Decoding the meaning of Home Loan and its various types.
- A Home Loan is a financial facility that enables you to buy a home.
- You can use the loan to buy new, pre-owned, and under-construction properties.
- You can also purchase plots or renovate your existing property.
- You must repay the loan in Equated Monthly Instalments in tenures lasting up to 30 years.
- Most lenders offer 70% to 90% of the market value of the property as the loan amount.
Buying a home is a significant milestone in life that all of us wish to achieve. But with the rising property prices, the task seems challenging. However, you can fulfil your dream of becoming a homeowner by taking out a Home Loan. Let us understand what is a Home Loan and the various types of properties you can purchase using the loan.
Home Loan – Definition
A Home Loan is a financial facility offered by banks and Non-Banking Financial Institutions that enables you to purchase a house or property of your choice. The lender provides the loan amount, and you can repay it in Equated Monthly Instalments (EMIs) over tenures lasting up to 30 years.
With Home Loans, lenders typically provide financing for 70% to 90% of the property’s market value. You need to pay the remaining amount as a down payment. Lenders assess your income, employment, credit score, and other necessary criteria to determine your Home Loan eligibility.
Download digibank Now
Types of Home Loans
Home Loans are typically classified as under
- Home Purchase Loans: A Home Purchase Loan allows you to purchase new, pre-owned, and under-construction properties in your city. This is the most common type of Housing Loan, and most lenders have tie-ups with various builders, making it easy for you to buy your dream home.
- Home Construction Loans: Home Construction Loans allow you to build a house on land that you own. You must provide an estimate of the construction expenses to the lender while obtaining this loan.
- Land Loans: A Land Loan enables you to buy a plot of land. You can take a top-up Home Construction Loan to build a property on the land.
- Home Improvement Loans: You can get Home Improvement Loans to renovate, repair or remodel your existing property.
- Home Extension Loan: A Home Extension Loan lets you increase the living area of your existing house.
- Home Loan Balance Transfer: With Home Loan Balance Transfer, you can transfer your ongoing loan to another lender if it reduces the cost of your Home Loan.
- Top-up Loans: Top-up Loans allow you to obtain a top-up amount on your existing Home Loan. It is not a new loan but an extension or top-up facility available on your ongoing loan.
Home Loan Prerequisites
Besides knowing what a House Loan is, you must comply with these prerequisites.
- You must show a minimum net annual income of INR 30,000.
- You should be employed for three consecutive years, with two years at the same organisation.
- You must ensure your credit score is excellent, typically 750 points or higher.
- You must submit all the necessary documents to be eligible for the loan.
As is apparent, Home Loans are an excellent financial facility that you can leverage to become a homeowner. You may even use Home Loan EMI Calculators to check the monthly EMI payable over your preferred repayment tenure. Remember to research the terms and conditions set forth by the lender before sending your loan application.
Download the digibank by DBS app to get started.
Download digibank Now
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.