Home ownership has come to represent the Indian ideal of settling down. Everyone wishes they had a peaceful haven to go to at the end of a hectic day. Due to rising real estate costs, even purchasing a home is becoming a Herculean endeavour. It’s not a good idea to use all of your funds on land or house acquisition, so a home loan is a simple method to finance your real estate investment.
These days, you can get a house loan from just about any financial institution, not just banks. A house loan is a service that has grown in popularity in recent years, but each borrower has unique needs and requirements. Many financial institutions have come up with the idea of creating various home loan packages to meet the needs of various demographics.
What is a home loan or mortgage?
You may compare securing a mortgage to financing a car. Mortgages are legal contracts between you (the borrower) and the bank, community bank, or other financial firms (the lender) whereby the lender lends the borrower (you) money (the mortgage) to buy property. In exchange, you commit to paying back that sum throughout a certain number of years (15 or 30 is typical) by making regular payments. Keep in mind that there are different types of home loans. Keep scrolling and know the various options available!
Various types of Home Loan
Land Acquisition Loans
Several financial institutions offer loans specifically for buying land. The buyer of undeveloped land has the choice of holding on to it as an investment until better times come around or of saving up and constructing a home on the site at his leisure. Up to 85% of the purchase price of the land might be financed by a loan.
Home Purchase Loans
Most mortgages are used to finance the purchase of a property, either brand new or pre-owned. This loan is easy to get your hands on since many institutions provide them. Interest rates, which may be variable or fixed, typically range between 9.85% and 11.25%. Furthermore, several financial institutions are prepared to lend as much as 85% of the amount.
Financing a Home Construction Project
Those who would rather design and construct their own house than buy one already on the market are the target audience for this lending program. The plot price is one of several factors considered during the approval process for this type of loan. If you want to include the cost of the land on which your future home will be built in your loan amount, you’ll need to buy it within a year of applying for a construction loan.
The loan amount is based on a rough estimate of the total construction expenses. The money might be given out all at once or in instalments.
House Improvement Loans
Would you want an extra bedroom or balcony? Some financial institutions, however, do offer loans for home improvement projects like expanding an existing structure by building more rooms or altering an existing system. If you have the necessary documentation, a loan like this will allow you to add stories to your house, remodel existing rooms to meet your needs, or construct whole new ones. This type of financing can be used for anything from building a duplex to combining many units into one massive dwelling.
Borrowing Against Your Home’s Value
Borrowers who have already obtained a mortgage but wish to purchase a different type of dwelling may qualify for a property conversion loan. Rather than continuing to make mortgage payments on two properties, borrowers can consolidate their debt into one and use the proceeds to buy a new home with no out-of-pocket expense. Despite the convenience, this sort of home loan is rather costly.
Loans for House Repairs
Painting, installing an above-water tank, fixing up the exterior and interior, and upgrading the electrical system are all examples of home improvement tasks that may improve the appearance of your property. However, a housing loan might be a lifesaver if you need to make necessary repairs or upgrades but don’t have the cash on hand. Home improvement loans may be used for a wide variety of interior renovations, such as tile replacement, electrical system upgrades, and more.
Bridge loans are short-term loans that current homeowners who want to buy a new property can qualify for. Borrowers can get the money they need to buy a new house while also shopping around for a buyer for their current residence. This type of mortgage loan often has a term of fewer than two years and necessitates the bank to hold a mortgage on a brand-new home as collateral.
Home Loan Eligibility
The availability of mortgage loans continues to grow, making the American goal of home ownership more attainable than ever. Mortgages are easy to get nowadays, but banks still have criteria they must fulfil before giving one out. If you follow the steps below, your home loan application won’t be denied.
The bank’s initial step is to review the paperwork you’ve supplied. This is the most important step for a bank when it comes to providing a house loan. Even a minor discrepancy in your supporting paperwork might result in the denial of your home loan application.
Your salary is a major factor in determining whether or not to grant you a housing loan.
Before approving your home loan application, the bank looks at your income and the size of the loan.
In deciding whether or not to grant you a home loan, a significant aspect is your credit score, which is, in turn, dependent on your credit history. A poor credit score will result in a loan denial for your home.
Age of the Borrower
A younger borrower has a higher chance of having their mortgage loan application approved. As a result of having more years ahead of them in which to make loan payments, younger applicants tend to do better. As an example, a 55-year-old borrower of age has 5 to 10 years to repay the loan, while a 30-year-old borrower would likely be granted more time.
If you have other debts at the time you apply for a housing loan, the probability of approval drops significantly. This is simply because banks prefer not to extend credit to borrowers who have previously committed to repaying a debt.
For those who have never filled out a mortgage application, it can be a nerve-racking experience. A house purchase is a significant life event, whether it is your first home acquisition or your permanent residence. Now that you’ve read our mortgage primer, you can take the necessary measures to ensure that you can get a home loan at affordable rates.
If you’re looking around for the finest housing loan – Piramal Finance is a great option. Check out the website for Piramal Finance to find out more about the types of home loans they provide.