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5 Types of Home Loans You Need to Know

Owning a home is an urge that each one of us wants to fulfill. Although everyone wishes to own a home not everybody is lucky enough to have one. If we talk of India, even settling down is synonymous with owning a home. In this world where everyone is busy chasing their dreams, a perfect abode has become essential for all where they can head up to at the end of the day and spend some time in solace.

Besides its being essential, owning a home has become a herculean task. Finding the right home can be a mission in its own right. Although, going to financegab.com may help you find your perfect home. It is not as easy as it looks to own a home. The process is long enough to wreck your nerves. You save money for a lifetime and when you finally feel that you can buy or get a home constructed, the ongoing market rates disturb your finances and you end up not having one to yourself.

Under such circumstances when the process of owning a home becomes too big a deal to be handled easily, a home loan is an easy way to fund the purchase, or maybe to renovate the roof with help from Taylor Roofs. Since burning your entire savings to buy a home or land is not a wise idea, the home loan comes to the rescue.

Before jumping direct to the types of home loans, let’s first discuss the basics of home loans.

A home loan is a loan given by a mortgage company, bank, or any other financial institution for the purchase of a residence. You can also seek help from companies such as Bright Homes which deal with financing a new home.

The banks and other financial establishments offer different types of home loans. The continuously rising demand for home loans in recent times has resulted in raising the expectations of people when it comes to home loans. Thus, to cater to the requirements of people, several banks have come up with the idea of introducing a home loan scheme in the market. To talk about a few, many banks have crafted home loans specifically for women, agriculturalists, etc.

Types of Home Loan

Lenders not only offer home loans for buying a house but also for a variety of purposes. Below are mentioned some popular types of home loans that are available in the financial market.

1. Loans for the Purchase of a Land

Many banks offer loans for land purchases. The buyer can save funds and construct a house whenever he/she wishes to or may have the land simply as an investment. Thus, purchasing a land is quite flexible. Up to 85% of the cost of land is provided in the form of a loan by banks such as Axis Bank or ICICI Bank.

2. Loans for the Construction of a House

This loan is designed for those who want to get their house constructed as per their wishes rather than buying an already constructed house. The approval of this loan is different from the cost of the plot is also included under this. An important clause when applying for this loan is that the plot on which the house is to be constructed must have been purchased within a year for its cost will be included in the loan amount. The amount of the loan is decided based on a rough estimate of the construction cost. The banks offering home construction loans are Bank of Baroda, Canara Bank, etc.

3. Loans for Home Purchase

This is the most popular type of home loan. It is provided for the purchase of a new/pre-owned home. The loan is commonly available in banks and is offered in different variants. The interest rate on this loan is either fixed or floating and usually ranges from 9.85% to 11.25%.

4. Loan for House Conversion

People who have already taken the benefits of a home loan and have purchased a home but want to move to an altogether new residence get an option for home conversion loans. They can easily fund the purchase of a new home by transferring the current loan to the new one. They also are not required to repay the previous home loan. Though the customers are guaranteed convenience under this segment, this is also a very expensive segment of home loans.

Read more: Best Tips to Make Your Home Loan Cheaper!

5. Loans for Home Improvement

It is a fact that the renovation and repair including paint, construction, internal and external repair, etc. will give a fresh look to your house. Using a service like Clean Pro Gutter Cleaning Fresno CA to clear your gutters can help improve the look of your home and reduce the chance of future damage caused by a blockage that is left unaddressed. If you lack funds for financing the repair and renovation of your house, many banks offer specialized home improvement loans to assist you in fulfilling your desire to live in a beautiful home.

With home loans becoming so common these days, it is equally important to identify your requirements and apply for the right kind of home loan. Recognizing the best fit for the type of home loan you need helps you reduce the paperwork, simplify the home loan approval process, and also gives you an advantage of enjoying the home loan at a reduced rate of interest.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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