Check out the different types of home loans available in India and the key factors to consider when applying to make a suitable borrowing decision.
Banks and Housing Finance Companies (HFCs) offer various types of home loans to cater to the specific needs of individuals. With the growing demand for housing finance, lenders provide multiple options to suit different purposes. It is therefore important to understand the types of housing loans available for you.
Several lenders offer home loans not only for purchasing a property but also for renovation, construction, or refinancing existing loans.
Here are some of the most common types of home loans available in India:
A standard home loan helps you buy a ready-to-move-in or under-construction property. As per RBI guidelines, lenders can offer financing of up to 90% of the property's value, depending on the borrower’s eligibility and the loan amount.
If you plan to purchase a residential plot for future construction, a plot loan is an ideal option. Unlike a home loan, which covers a constructed property, this facility provides funds solely for purchasing land. The land must typically be non-agricultural and located in an approved area.
You can opt for a home renovation or improvement loan if your home needs repairs or an upgrade. This loan helps finance remodelling, repainting, or structural repairs. As the amount borrowed is smaller compared to a full home loan, the repayment tenure is usually shorter.
Home construction loans are suitable if you already own a plot and wish to build your home on it. The loan is disbursed in instalments that correspond with various construction milestones. The amount sanctioned typically depends on the estimated construction cost.
A bridge loan is a short-term loan that helps you manage the gap between selling your existing home and buying a new one. It provides quick funds so you can make the new purchase before receiving the full payment from your property sale.
Also known as an interim or swing loan, it acts as a financial bridge during this transition period. Although these loans provide short-term financial flexibility, they often come with higher interest rates and require disciplined financial planning to avoid repayment difficulties.
A home extension loan is useful if you plan to expand your living space, such as by adding an extra room or floor. The lender typically covers up to 90% of the estimated project cost, depending on your eligibility and the loan-to-value ratio.
A home extension loan differs from a renovation loan because its purpose is to expand the existing structure rather than to repair or upgrade it.
Step-up home loans are designed for young professionals anticipating future income growth. They begin with lower EMIs, typically starting with an interest-only phase, and gradually transition to regular EMIs covering both principal and interest. This structure provides repayment flexibility and enhances eligibility during the initial years of one’s career.
A home loan with an overdraft facility links the home loan to a savings or current account, enabling surplus funds to be deposited at any time to reduce interest liability. The deposited amount is treated as a prepayment, yet withdrawals remain permitted to maintain liquidity.
While convenient, such loans often carry slightly higher interest rates, and overdraft deposits are not eligible for tax deductions.
A Home Loan balance transfer allows an existing home loan to be shifted from one lender to another that is offering more favourable terms. It can help reduce EMIs or shorten the tenure. However, associated charges such as processing fees must be carefully evaluated to ensure net savings.
The Top-up Home Loan facility provides access to additional funds over and above an existing home loan without extensive documentation. The amount can be utilised for diverse personal or housing needs, offering a practical means of financing while continuing with the ongoing loan.
A pre-approved home loan provides approval for a specific amount based on your eligibility, even before you have selected a property. Eligibility is determined on the basis of income and repayment capacity. Pre-approval facilitates budget planning and enables quicker property purchase decisions.
Choosing the right home financing option involves not only finding the lowest interest rate but also understanding your financial situation thoroughly. A well-informed decision can help you manage repayments comfortably and avoid unnecessary financial pressure later.
Here are some of the key factors you need to consider when planning to apply for a home loan:
Your credit score plays a significant role when you apply for a home loan. Lenders review this score to assess your repayment reliability. A higher score improves your chances of approval and may help you secure a more favourable interest rate. It is essential to regularly check your score and take steps to improve it if necessary.
Consider how much money you require and how much you can comfortably repay. Evaluate your current income, monthly expenses, and any existing loans before deciding on the loan amount. Borrowing more than you can manage may lead to financial strain in the future.
Lenders also verify your financial stability by reviewing income proofs, bank statements, and credit history to ensure you can manage timely repayments without strain.
You will need to choose between fixed and floating interest rates. Fixed rates remain the same throughout the loan tenure, providing predictability in repayments, although they may be slightly higher initially. Assess your financial stability and the prevailing market trends before making a choice.
Before applying, estimate your monthly payments. You can use the EMI calculator available on Bajaj Markets to plan your budget effectively and select a loan tenure that suits you. Ensure that the EMI amount aligns with your income so that repayments remain manageable and affordable.
Your chosen home loan tenure affects both your EMI and the total interest paid. A longer tenure reduces your monthly EMI but increases the total interest paid over the lifecycle of the loan. Conversely, a shorter tenure increases the EMI amount but helps you save on interest in the long run.
Compare the total cost of the loan with the benefits it offers. Consider processing fees, prepayment charges, and any additional expenses that may be involved. Also, account for the tax advantages that come with home loan repayments. Reviewing these aspects carefully can help you identify a loan option that offers the best value.
A plot loan, or land loan, is the right option. It allows you to purchase land within approved residential or municipal limits, either as an investment or to build a home later.
For first-time home buyers, a joint home loan is a good option as it increases eligibility, improves approval chances, and may offer lower rates for women co-applicants. A home construction loan suits those building on their own plot, allowing funds in stages as construction progresses.
If you prefer predictable EMIs, a fixed-rate home loan ensures repayment stability without market-linked changes.
Yes, you can switch from one type of home loan to another even after sanction or approval. Many lenders allow you to convert your loan type or transfer it to another bank to benefit from lower interest rates or improved terms.
However, review the transfer charges, revised tenure, and potential savings before making the switch.
No. Loan tenures differ by type and lender. On Bajaj Markets, repayment can stretch up to 32 years, based on eligibility, income, and lender policy.
It depends on your financial profile. Salaried, self-employed, and NRI applicants can choose from purchase, renovation, or plot loans. Lenders assess income stability and credit history before approval.
Your income influences both the loan amount and the suitable type. Compare fixed and floating rates, tenure, and repayment flexibility to ensure EMIs stay affordable as your finances evolve.
A home improvement loan is ideal if you already own a property and need quick, smaller funding for upgrades. A standard home loan suits you if you are buying a new property and require a larger amount with a longer tenure.