You have access to a wide variety of house loans, and you should select one in accordance with the specific requirements of your situation. There are more than one or two distinct kinds. Lenders provide a diverse range of home loans, such as LRD Loan and Home Construction Loan, in order to cater to the requirements of a broad spectrum of prospective borrowers and meet their demands.
But before settling on a certain kind of housing loan for the purchase of your new home, it is in your best interest to first determine what your requirements are and then select the housing lenders who offer the products that come closest to meeting those requirements.
Home Construction Loan
The Home Construction Loan is offered for the independent construction of a home or other residential property, as the name of the loan product would imply. Borrowers who already own land and need money to fund the construction of a residential unit on that land are the ideal prospects for this product. Instead of purchasing a completed or ready-built home, the borrower who accepts this loan will have the opportunity to create a home that is tailored to his or her own wants and preferences. It’s common for this loan to be disbursed in instalments rather than all at once. How these payments for the house construction loan are made will depend on the type or stage of construction.
Loan for home improvement
Lenders commonly provide financing for borrowers to undertake renovations or repairs to residential property that is already in their possession in this particular subgroup of house loans. The funds are flexible and can be used for a variety of projects, including remodelling, upgrading, and house repairs as well as home improvement jobs including installing flooring and tiling, painting, and remodelling.
A home extension loan is available to homeowners who desire to expand their existing residential property with a new room, floor, or other feature. This finance can be used for a variety of home improvement projects. Again, to meet RBI standards, lenders typically finance between 75% and 90% of the expected cost of construction, with the exact percentage varying based on the loan size and LTV ratio.
Composite housing loan
There are several similarities between this loan and the Home Construction Loan. A composite home loan includes financing for buying a piece of land and building your house there later within a predetermined time limit. This sort of funding is often known as a combined mortgage. A composite house loan often disburses the loan amount gradually rather than all at once, in contrast to other kinds of mortgage loans. Similar to the disbursement process employed in the case of a home building loan, the initial payment is paid toward the purchase of the plot, and future payments are made in line with the stages of construction on the house that have been completed.
Bridge loan
Unlike Home Construction Loan or top up loan, bridge house loans may not be well-known to many homeowners. You can use the proceeds from the sale of your current home as security for this loan if you want to purchase a property that is larger or better quality than your current residence. Since homeowners typically require more time to sell the property of their previous home, a liquidity gap frequently has a negative influence on the acquisition of a new home.
Bridge home loans provide a short-term loan that bridges the funding gap in order to accomplish this goal. This allows the homeowner to finance the new purchase while also giving them time to negotiate the best price for the sale of their current home. Bridge mortgages are also referred to as “jump loans.” However, keep in mind that bridge loans often have shorter terms (one to two years) and higher interest rates than conventional home loans. Keep these things in mind when comparing the two loan types.
Lease Rental Discounting Loan (LRD Loan)
Lease rental discounting is the practise of using rental income as collateral to secure loans from banks. The bank will consider long-term cashflow before granting a loan based on a certain amount. The loan will then be repaid with the anticipated rents.
LRD Loan works under the presumption that rental units have a predetermined amount of rent owing. Tenants and the property’s owner enter into lease agreements. This agreement calls for a regular payment known as rent. When a property owner asks for a loan, the rental receipts generated throughout the term of the lease may be utilised as security.
Smart housing loan
Mortgages are now being offered by a wide range of financial institutions, and they are typically linked to the borrower’s bank account.
You will benefit most from this home loan category if you deposit any additional funds in the linked account because interest is calculated by deducting the linked account’s monthly average amount from the outstanding principal on the loan. This is because the interest is calculated after deducting the outstanding principal balance of the mortgage from the average monthly balance of the linked account. Debitors are frequently permitted to withdraw or deposit money from this account as needed, which helps to keep the system’s liquidity level adequate. But bear in mind that the interest rate on this type of loan is typically a little higher than the interest rate offered on traditional house loans.
Top up loan
Young, well-paid people who are just starting their careers frequently find that income requirements prevent them from qualifying for larger Home Loans, which in turn lowers their entire loan eligibility. Some lenders are now providing step up house loans, which are mortgages with a realistic repayment plan for borrowers in their early earning years. The EMI repayment schedule for this mortgage is designed so that the borrower must make modest EMI payments in the early years of the loan’s term. These payments will then be increased in the later years of the loan’s term to reflect the greater potential for expected income growth of such borrowers. The improved potential for anticipated income growth of such folks has been taken into consideration while designing the EMI repayment plan for this mortgage. Young salaried individuals who select this loan choice have the opportunity to receive a larger loan sum that is based on the anticipated future rise in wage. Borrowers also have the choice to pay solely the interest on their loans during the moratorium (pre-EMI) period.