Factors to Consider Before Applying for a Home Construction Loan_Banner_WC

Banner-Dynamic-Scroll-CockpitMenu_HomeLoan

Factors to Consider Before Applying for a Home Construction Loan_WC

5 min 02 Dec 2022
Tips to Apply for Home Construction Loan
Highlights
  • Things to Consider While Applying for a Home Construction Loan
  • How to Apply for Home Construction Loan

A home construction loan is different from a Home Loan. Borrowers avail of Home Loans to either buy a ready-to-move-in property or an under-construction one. Home construction loans, on the other hand, are availed of by those borrowers who wish to build their own homes. In the case of a Home Loan, the lender generally disburses the entire amount in one go. However, in the case of home construction loans, the lender releases the amount in phases. Further, availing of a home construction loan requires one to submit a construction plan along with completion timelines and budget. This article aims to apprise readers about home construction loans, the procedure involved, the home construction loan interest rates and the factors to consider while applying for one.  

Also Read: 6 Point Differentiation Between Home Loan Vs Home Construction Loan 

7 Things to Consider While Applying for a Home Construction Loan

The Money Will Come in Phases

As mentioned before, when it comes to home construction loans, the lender does not sanction the entire loan amount in one go. Instead, the money is released in bits and chunks based on the construction phase you have completed. The good part about this arrangement is that one does not have to deal with a large sum at any given time – money comes when you need it and therefore, borrowers feel compelled to spend it cautiously.  

You Cannot Change Your Construction Loan

To be able to avail of a home construction loan, you will be required to submit a detailed construction plan along with completion timelines and the budget required. Your lender will sanction you a loan based on this plan and once the loan has been finalized, you won't be able to change the construction plan.  

Therefore, before applying for a home construction loan, borrowers must sit with a designer and come up with a final plan after proper deliberation and planning.  

You Won't Get a Long Tenor to Repay the Loan

Lenders give borrowers the flexibility to opt for long tenors stretching up to sometimes 40 years in the case of Home Loans. However, in the case of home construction loans, borrowers generally get a short tenor to repay the loan. In any case, you can use a home construction loan EMI calculator to understand your EMI obligation with respect to the loan amount you have availed of. This will help you plan repayment in a better way.

You Can Avail of Tax Benefits on a Home Construction Loan

Here's another good news – under the Income Tax Act, one can avail of tax benefits on home construction loans. Under Section 80C of the Income Tax Act, one can claim tax deductions up to a maximum of Rs.2 Lakh* on payments made towards interest repayment and under section 24B of the same act, one can claim tax deductions up to a maximum of Rs.1.5 Lakh on payments made towards interest repayment. Over and above this, first-time home buyers can also claim an additional deduction of up to Rs.50,000 under section 80 EE of the Act.   

Home Construction Loan Balance Transfer

Most borrowers do not know this – just like lenders offer a balance transfer facility on Home Loans, they also offer a balance transfer facility for home construction loans. If you think your current lender is charging you a very high-interest rate and another lender is willing to offer you a better deal, you can transfer your home construction loan to the new lender. Please know that this would require you to pay a balance transfer processing fee, which is usually 1% of the total loan amount. Therefore, one should opt for a home construction loan transfer only when the difference in interest rate is big enough to compensate for the high home construction loan balance transfer fee. 

Eligibility and Documentation Requirements

Just as in the case of Home Loans, home construction loans are also sanctioned only when a borrower meets a lender's eligibility requirements. Most lenders require borrowers to have a stable job as well as a stable source of income to be eligible for a home construction loan. Age requirements vary between 21 and 65**. Further, borrowers must have an excellent score.

Apart, to ensure a smooth home construction loan application process, keep all the required documents handy with you. You will need mandatory documents (PAN card or Form 60), KYC documents, income documents, a detailed construction plan along with budget and timelines, etc. Go to your lender's website and check their home construction loan eligibility and documents required before applying to ensure a smooth loan application process.  

Higher Interest Rate

Here is the most important thing to keep in mind – home construction loans draw higher interest rates than Housing Loans. Though these loans are not very expensive, they are also not as affordable as Home Loans. As of now, home construction loan interest rates vary between 8% and 15%*. The final interest rate that you will be offered will depend on several factors, including your credit score, age, income stability, etc.   

How to Apply for Home Construction Loan?

Follow these steps to apply for a home construction loan:  

  • Go to the website of the lender from whom you wish to avail of the home construction loan.  
  • Open the Home Loan construction application form on their website. 
  • Fill the form with personal and professional details, such as your name, age, gender, area pin code, monthly income, etc.
  • Fill out the form and someone from your lender's team will connect with you and explain the remaining steps of the process.  

A home construction loan is an easy way to get access to ample funds to build your own home. Home construction loan interest rates are affordable and therefore, paying off these loans is easy. 

Also Read: Home Loan vs Construction Loans 

**The age eligibility criteria may vary. 

 

Blog-Intro-Disclaimer

DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

Asset Publisher

Trending Articles
alt
home+loan Home Loan

[N][T][T][N][T]

Advantages for First-Time Home Buyers
2023-07-14 | 4 min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Top Benefits of a Loan Against Property Over Collateral-Free Loans
2024-01-09 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

All About Home Loan Balance Transfers
2024-06-04 | 4 mins
alt
home+loan Home Loan

[N][T][T][N][T]

All You Need to Know About Home Loans
2023-01-19 | 5 min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Understanding the Fees and Charges on Your Loan Against Property
2024-02-16 | 8 min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

3 Different Loan Against Property Types You Should Know About
2024-02-13 | 5 Min
alt
home+loan Home Loan

[N][T][T][N][T]

6 Ways to Reduce Your Home Loan Interest
2024-03-20 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

Benefits of a Home Loan
2023-02-20 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

Home Loan Burden Management: Five Tips
2022-06-27 | 3 min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Pay Off Your Home Loan Quicker
2024-03-11 | 4 Min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Things to Do If Your Loan Against Property Application Gets Rejected
2023-02-14 | 5 min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Pay-off Your Debt with Bajaj Housing Finance Loan Against Property
2024-02-14 | 5 min
alt
home+loan Home Loan

[N][T][T][N][T]

Types of Home Loan Charges
2024-01-22 | 3 Min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

A Guide to Loan Against Property for Doctors
2022-06-27 | 5 Min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Loan Against Property for Doctors: Interest Rates and Charges
2023-11-24 | 6 Min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Short vs. Long Loan Against Property Tenor - Which Is Better?
2024-05-07 | 4 min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Understanding the Fees and Charges on Your Loan Against Property
2024-04-10 | 6 min
alt
loan+against+property Loan Against Property

[N][T][T][N][T]

Easy Ways to Pick the Right Loan Against Property Tenor
2024-05-14 | 3 min

Call_And_Missed_Call

RHS-insurance-ad-card