Home Loan is a type of loan that is given to people in need to purchase their own new house. Every person wants to invest a large amount at some point in their life to fulfill their dream of owning a house, and banks, NBFCs, and financial organizations make this task easier. Through this loan, you can use a large sum of money at once to buy a house for yourself, and through the installments of the loan, gradually return the entire amount to the loan provider company or bank. Usually, it takes 20-30 years to repay a home loan.
The home loan amount is decided according to your profile, taking into account factors like your income, credit score, and property value. Apart from this, factors like CIBIL score, interest rate and repayment terms are also considered while taking this loan.
When you purchase a new house, you have to pay a percentage of the total amount from your pocket, the rest of the money is financed by loan companies and banks. The amount financed by all the financial organizations can be different, which is according to their rules.
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Home Loan Types
Fixed Rate Home Loan
In this type of loan, the interest rate that is decided upon the total loan amount remains fixed until the end of the loan term. The borrower can easily choose a better EMI option for themselves and repay that installment easily until the loan is fully repaid.
Floating Rate Home Loan
In this type of home loan, the interest rate increases or decreases based on the repo rate, which results in changes in the installments of your entire loan amount. The advantage of taking this type of loan is that whenever the RBI’s repo rate decreases, there are more chances of your interest rate decreasing as well.
Home Construction Loan
This type of loan is taken when you are building a new house. Banks and financial organizations send the money for the loan to the borrower’s bank account in a step-by-step manner before or after the construction work begins. The full amount of the loan is given by loan companies as a 100% Home Construction Loan until the construction of the house is completed.
Home Loan Balance Transfer
Through balance transfer, any consumer can transfer their home loan profile from one bank to another. This is done because the interest rate chosen by the consumer in the new bank is lower than the previous one, and Home Loan Balance Transfer is done to take advantage of this.
Pradhan Mantri Awas Yojana (PMAY)
This is a government scheme for taking home loans. Loans are given to poor people to buy a new home or to construct a new one, along with subsidies on the loan’s installments, so that poor people can pay the installments easily. The interest rate is also very low in this scheme.
The best home loan for applying for a home loan by a government employee is SBI’s Privilege Home Loan. This home loan has many features like low interest rate, zero processing fee, pre-closure penalty, 30 years to repay the loan, interest rates and discounts for women borrowers. Any government employee can apply for this home loan, this SBI product is best for them.
Home Loans can be transferred to any other person. This happens when a person wants to sell the property he has taken on loan. To do this, the property has to be registered in the name of the new buyer. Before registering the name of the new buyer, the person selling the house will have to do his home loan foreclosure, after which the new buyer will have to fill out a loan application for that land. Home loans can be transferred from one person to another only after all these processes.
Home loan interest rates can be both Fixed & Floating. Both the interest rates have their own characteristics. If you have taken a home loan on Fixed Interest Rate, then your interest rate remains the same for the entire tenure of repaying the loan. You have to pay the same type of instalment in this every month. After this, if you have taken a loan on Floating Interest Rate, then according to the repo rate of RBI, the interest rates fluctuate. In this type of loan, your interest rate can sometimes be less and sometimes more.
Home loan is a loan that can be repaid in full before the loan repayment period. In other types of loans such as personal loan and loan against property, pre-payment charges are levied on you for pre-closing the loan, but in home loan these charges are not levied. If you have been paying your home loan instalments for a long time, then you can pre-close your home loan by paying the full amount.
While applying for a home loan, many people’s home loan applications get rejected. After getting rejected, you cannot get a home loan from that finance company. Before approving the loan by the finance companies, the person applying for the loan is checked on several parameters. If your CIBIL score is bad, you have taken some other loan. Or there is a dispute on the property to be bought, apart from this, your documents are not complete, then due to all these reasons the home loan application gets rejected.