People acquire land either to build a home or for the purpose of investment. If you wish to buy a piece of land or a home, but do not have the entire amount for it, you have the option to apply for a loan that may be used to purchase the same.
Most people already know about the availability of home loans and probably may consider going in for one, even when they really wish to purchase just the land. Home loans are available for under construction or ready for possession properties. Such loans can also be sanctioned by lenders if the construction is expected to start soon.
On the other hand, if you wish to apply for a loan to acquire land, you would have to apply for a plot loan. This would allow you to buy empty land. In most situations, terms and conditions, interest rate, application and sanction procedures for housing and land loans are essentially the same.
However, there are a few differences between a land loan and home loan. Let’s take a look at some differences between the two:
- Land loans are available for only residential properties that are located within the municipal limits or corporation.
- Maximum LTV (Loan-To-Value) is capped at 70% of the land value if the land is located in a smaller town or city. This would further reduce to 50 – 60% of the plot value for land located in tier 2 or tier 1 cities.
- The maximum tenure for land loans is up to 15 years.
- There would be no tax benefit on the principal and interest rate. However, you would be eligible for a tax deduction in case you apply for construction funding to build your home.
- Most lenders would levy a maximum cap on the amount you may borrow for the purchase of an empty plot of land.
- NRIs would have to go through a stringent process and if loans are sanctioned, they would often be at a higher rate of interest.
- Land loan rate of interest is usually higher than housing loans.
- Home loans are available for all kinds of properties that are located in any area.
- Principal and interest on home loans is eligible for tax benefits.
- Home loan tenure is available for up to 25 years.
- In most cases, there would be no cap on the amount you borrow. It would be based on the value of your home and your repayment capability.
- NRIs are offered home loans at a competitive rate of interest.
- Rate of interest on home loans is slightly lower than the land loan.
For home loans and land loans, the application procedure, due diligence procedure, and requirements are essentially the same. Both loans have their pros and cons, so it is recommended that you always consider your financial situation and personal requirements before you make any kind of decision.
If you are confused about the different types of loan and procedures or want more information on home loan balance transfer, it is advisable to opt for Bajaj Finserv Home Loan at Finserv MARKETS. We will get all detailed information and it will help you choose a safe route.
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