Just like food and clothing, housing is also a very basic necessity. And for this the three main available option are either you rent a house, take it for lease or own one. While every youngster strives to build a house, the income and credibility of the person will decide where he is eligible for a home loan or not.
With the help of home loan you can increase the probability of acquiring a house. Many, especially in India will not be able to buy a house will full cash; this is where home loan creates an opportunity for low-class and middle-class community to have a house of their own. This helps in capital appreciation; there is no doubt property prices have gone up in the last 5 years. Investing in the house is always a safe and smart move. The value of land always grows and thus appreciation for the investment can be visibly seen within a few years.
Here are 5 different types of home loans available for those who are keen about creating/recreating their living space.
Different Types of Home Loans Available in India
Land Purchase Loan:
As the name itself mentions, land purchase loans are provided in order to buy lands or plots. These are loans provided for either residential or housing and investment purpose. The banks offer up to 85% of the property value as a loan when purchasing land or plot. These loans are usually taken in order to build a house. Irrespective of how many house or land you have if you have the income to repay and good credibility, you can apply for these type of loans.
House Construction Loan:
Home loans are offered to build a new house in the way you desire rather than buying a full constructed and partly constructed house. The method in which home construction loans are obtained is somewhat different from that of the usual loans provided for any housing purpose. When applying for home-construction loans the applicant must have some knowledge of the estimated cost and then apply for a loan accordingly. House construction loans in most cases are easy to obtain once the borrower offers the necessary documents to support his claim.
House Purchase Loan:
One of the most commonly and popularly availed loans is home purchase loans. These are used when an individual buys a property from a different owner. It is also essential to take sufficient care in buying assets from other owners. The home loans are given on both floating and fixed interests and even hybrid loans. Hybrid loans are those which include fixed interests and floating interests combined in a perfect way. Almost all banks offer home purchase loans. This loan comprises a little elaborated process when compared to house construction loans.
House Improvement Loan or House Extension/Expansion Loan :
House improvement loans are those that are provided when a property has to undergo repair works or renovations. The kind of expenditures that are covered by this includes repair works, painting works both internally and externally, plumbing works, electrical work, waterproofing the property and even when constructing overhead tanks and underground tanks. There is also another category to this which is expansion or extension loans for houses, these are given when people tend to extend or expand their current house. It includes addition of extra bedrooms, living rooms, bigger bathrooms or new flooring or some space for balcony. It is nothing but the alteration in the structure of the house.
These loans are also called as short term loans which are taken by the owner of the residential property. Bridge loans will help people to bridge the gap between an old and existing house with a newly purchased land. These types of loans are for not less than two years and require finance documents of the new property. Along with these types of loans there loans that are provided to such people who wish to move into another home with the existing loan. If in case the person wants to move into a new place they have an option of moving by paying some extra amount or pre-payment on the prior loan. When this route is taken there is no need for paying the loan on the previous home and thus its called conversion loan.
Applicants for a home loan can avail tax benefit. Under Section 80CCE of the Income Tax Act, 1961 repayment of principal up to Rs 150,000 on a home loan is subject for a tax deduction. Thus make use of every opportunity available to convert your savings into an investment.
NRI home loans are for the non-residential Indians who have settled away from India and want to purchase a property and invest in India. This home loan is a bit different from the regular home loan as the paperwork required in this home loan vary a bit. Apart from this, it is the same as that of a normal home loan.
Home Conversion Loan:
Many of the banks offer home conversion loans to provide extra benefit to their existing customers. A home conversion loan is one through which one can transfer their existing home loan plan to another plan under the same bank. People may misunderstand it by home loan balance transfer but, it is quite different from a balance transfer- In balance transfer you transfer your existing home loan balance to another bank in terms to reduce the interest rate. But in home loan conversion you just shift from one home loan plan to another home loan plan within the same bank. It is not always done to reduce the interest rate but to get other benefits too.
One can get these Home loans from any of the top landing banks in India, but in order to avail any of the home loans, you need to fulfill the eligibility criteria of that particular bank from which you applied for your loan.
Common Eligibility Criteria to Avail a Home Loan in India
The eligibility criteria for a home loan vary from lender to lender. But in general they look for the applicants Income, Age, Debt to income ratio, and CIBIL score.
Documents Required for Availing a Home Loan in India
- Complete Home Loan Application Form with one passport size photograph.
- Photo Identity Proof: Passport/ Driving License/ Voter ID/ PAN
- Residence Address Proof: License/ Registered Rent Agreement/ Utility Bill
- Residence Ownership Proof: Sale deed or rental agreement
- Income Proof: Salary slips and Form 16
- Job Continuity Proof: Appointment letter at employment and validation letter from HR
- Bank Statement: Past 6 months’ document
- Property Documents: Sale deed, Khata, Transfer of ownership
- Advance Processing Cheque: A canceled cheque for validation of bank account
- Investment Proof: LIC, mutual funds, property document etc.
- Financial Documents:
- For Salaried Individual: 3-month salary slip, Form 16 and bank statement.
- For Self-Employed Individuals: IT returns for the last 2 years along with computation of income tax for the past 2 years certified by a Chartered accountant.
- For Self-Employed Non-Professionals: IT returns for the last 3 years along with computation of income tax for the past 2 years certified by a Chartered accountant.