Currently, interest rates on home loans across India are as low as 6.5%, according to a report on Business Standard. When asked about the possible impacts of its move to lower mortgage interest rates during the festive period, Renu Sud Karnad, managing director at HDFC said, the lower interest rates help. However, it’s one of the many variables for the increasing demand for home loans.
Karnad noted, “Housing is more affordable than ever. Property prices have remained the same across the country and income levels have increased in the last couple of years.” A house is one of the essential things one should invest in, and this could be the right time to do so. But before making a purchase, take the time to know the amount you need to buy a house and choose a home loan that fits your needs. Read on to understand the types of home loans you can choose in India.
Home Construction Loan- Demand For Home Loans
This type of loan is ideal for people who already own a piece of land and wish to build a custom home or complete the construction of an unfinished building. It’s important to note that the approval process of home construction loans is different from other mortgage options. That’s because lenders account for the cost of the plot wherein you’ll construct your home. Mortgage lenders advise that the land must have been purchased within a year when applying for home construction financing. That way, lenders can add the land cost to the loan amount based on rough estimates of the construction expenses.
Loans For Home Purchase
If you’re planning to buy residential property, you’ll want to obtain a mortgage to purchase your home. Typically, the maximum home loan amount banks offer is 90% of the current market value of the home you desire to buy, while private lenders offer loans worth 80% of the property value. Keep in mind that you need to be 18-65 years and have a credit score of 750 and above to get a home loan.
In most cases, poor credit scores hinder homebuyers from accessing home loans, but that shouldn’t stop you from owning a home. Property finance experts recommend seeking a home purchase loan from sellers. Also known as seller financing, a home purchase loan allows property buyers and sellers to agree on payment terms with little intervention by third party lenders. This financing option is unique and requires a larger down payment paid in installments at higher interest rates. However, the closing costs involved with seller financing are usually lower than conventional mortgages.
Home Conversion Loans
A home conversion loan involves transferring your existing mortgage to another type of home loan within the same bank or mortgage lending company. This financing option is suitable if you have already obtained a mortgage and bought a house but want to move to a more affordable and competitive loan. While this loan guarantees convenience, it is one of the most expensive options because you have to pay a conversion fee.
Purchasing a home is one of the most significant financial decisions you’ll ever make. Therefore, take time to research how much you need to save for a house. Also, evaluate the different financing options available. Depending on your needs, you can choose loans for home construction, conversion loans, and a home purchase loan.