A home loan is a sum of money that an individual borrows from a bank to purchase a house. Some of the crucial factors that every loan borrower must consider are credit score, loan amount, interest rate, and loan tenure. In order to meet the various needs of customers, banks now offer different types of home loans.
If you want to know more about different types of home loans, then read this article.
Buying a home can require a substantial amount of money. Therefore, not everyone can afford it from savings alone. However, there is another option that people can consider in order to buy a house. That option is a home loan.
Nowadays, thousands and thousands of individuals seek financial help from banks to purchase a home. Furthermore, the requirements of every loan borrower can vary. Therefore, to meet the varying requirements of home buyers, many banks provide a variety of home loans.
Here is a list of some of the types of home loans-
- Home Purchase Loan
This is the most popular and common type of home loan. This type of loan helps a borrower buy a property based on his/her choice. With the help of this loan, a borrower can purchase a new or pre-owned house. A home purchase loan can be borrowed at a fixed interest rate or floating interest rate. However, every borrower should know that banks don’t fund the entire cost of house purchase. They will approve up to 80-90% of the cost of the house.
- Land Purchase Loan
If a buyer wants to purchase a plot to construct his/her house, then this type of loan is an ideal option. The interest rate to avail this loan can vary from bank to another. Therefore, the loan borrowers must check the interest rate before availing a loan.
- Home Construction Loan
This type of home loan is for people who want to construct their own house instead of buying a pre-constructed house. The disbursal process of a home construction loan can vary from a home purchase loan. In some cases, the entire loan amount can be disbursed as a lump sum payment. However, the disbursal can also be done in multiple instalments. Also, the loan amount is based on the approximate cost of construction.
- Home Improvement Loan
Renovating a house can require a lot of money. However, a homeowner can get financial help with this type of loan. With the help of this loan, a homeowner can change electrical items, fix the tiles, etc.
- Home Loan Balance Transfer
This type of loan helps an individual to transfer his/her loan from one bank to another. People often avail this loan in order to get a lower interest rate from a different bank.
Choose the Right Type of Home Loan
There are various types of home loans. Therefore, it is of utmost importance to first find out your requirements and then apply for a loan based on them. This will make the entire loan process easier for you.