A home loan is financial assistance that a borrower avails from any money lender to buy/ renovate a house for residential or investment purpose. This is a type of personal loan where the home you want to buy or renovate is to be given as collateral to the lender. The lender will provide the loan amount in exchange to it. He/ She can take over the legal charge of your property and sell it to revive the loan amount.
Different types of home loans
Depending on the purpose of the loan, home loan are generally divided into the following categories:
- Loan for purchasing home
- Home improvement loans
- Loan for land purchase
- Loan for home construction/ extension
Features of home loan
- You can avail 80%-90% of the original value of your house as a home loan: The lender demands 10%-20% of the value of your house/property as down-payment. The remaining amount is the loan that you can repay through EMIs.
- Home loan interest rates are flexible and lower as compared to other personal loans: Home loan interest rates vary from 8%-13% depending upon your CIBIL score and type of the loan.
- Repayment tenures are considerably high in home loans: The repayment tenures of home loans are as high as 18-20 years. You can also pre-pay the loan in case you have enough money in the middle of the tenure by paying a little amount as prepayment fees.
- Tax saving is an extra benefit of a home loan: You can save up to Rs. 1,50,000 from your tax as a part of the payment of your home loan interest.
Eligibility for a home loan
Different lenders set different eligibility criteria for offering home loans. Generally, it would be best if you fit in following criteria to avail a flexible home loan:
- CIBIL score above 650: Depending on your income, repayment histories, debts, and assets, you get your CIBIL score. If your score is as high as 800 or above, you get to negotiate with your lender and get the loan with lower interest rates.
- Lower debt to income ratio: Make sure that your income is high enough to repay the loan. You can avail two loans at a time, but your debt increases in this case. Once the debt increases beyond your repayment capacity, your credit score goes down. You can’t avail further loans easily after this.
- Age: Your age must be in between 18 -61 years to avail a home loan.
Process of getting the home loan
- Choose the best lender after ample market research
- Fill the home loan application form once you fulfil all the eligibility criteria
- Get the interest rates for the required amount through home loan interest rate calculator.
- Enter the loan amount and submit the required documents.
- Get your documents verified and the lender will sanction the loan immediately.
Thus, it is easy to fulfil the dream of having a house of your own through home loans. Maintain your financial stability, and you will surely get the amount you require to buy the property.