What is Home Loan?_banner_WC
The high cost of real estate in India means that to be a homeowner, you usually have to avail of a Home Loan. But what is a Home Loan? It is a loan you take to purchase a residential or commercial property.
When you avail of a Home Loan, you mortgage your property to your lender. Each month, you then repay a portion of the principal amount, along with the interest, through EMIs. Both the interest and principal components qualify for a tax deduction.
A Home Loan is a secured loan. When you avail of finance, your property serves as the collateral against it. You gain complete ownership of the property at the end of the tenor, when you repay the principal and interest in full.
Before you avail of a Home Loan, find out what are the types of Home Loans available to you.
- Home Purchase Loan: To buy a new or second-hand home
- House Expansion/Extension Loan: To enhance the current structure
- Home Improvement Loan: To renovate, remodel, or repair a home
- Home Conversion Loan: To finance a new home rather than the old one, which the Home Loan was initially taken for
- Home Loan Balance Transfer: Used to switch a Home Loan from one lender to another
- Top-up Loan: Availed of over and above a Home Loan Balance Transfer to get an additional amount separate from the outstanding Home Loan amount to meet a variety of needs
- Joint Home Loan: Taken by two or more individuals
The ideal Home Loan for you depends on your needs. Since different types of Home Loans are customised for different purposes, it is important you apply for one that best suits your requirement. Moreover, chances are that your odds of approval are higher with such a loan.
Do note that some of the loan’s features depend on the Home Loan guidelines and regulations set by the RBI. An example is the maximum capping on the loan-to-value ratio of a Home Loan at 75% to 90% of the property value, which is set by the RBI.
Before you proceed to apply, it is advisable to check your eligibility. Use our Home Loan Eligibility Calculator to check your eligibility.
Lastly, keep in mind that there are mainly 2 types of home loans, when divided as per interest rate:
- Fixed-Rate Home Loan: Allows you to lock-in at a given interest rate (either for the whole tenor, or till a reset date)
- Floating-Rate Home Loan: Allows you to benefit when the interest rate dips. However, the interest may also increase due to market conditions.
*Terms and conditions apply
What Is Home Loan_PAC