Different Types of Home Loans in India

Banks and housing finance companies (HFCs) offer various types of home loans to meet the specific needs of individuals. With growing demand for housing finance, lenders now provide several home loan options to suit different purposes. It is hence important to understand different types of housing loan options available for you.

Several lenders offer home loans not only for purchasing a home but also for purposes such as home renovation, construction, or refinancing existing loans. 

Here are some of the most popular mortgage loan types available in the financial market:

• Home Loan

• Property Loan

• Plot Loan

• Home Renovation Loan

• Home Construction Loan

• Bridge Loan

• Home Extension Loan

• Step-up Loan

• Interest-saver Loan

Home Loan

You should opt for this loan if you want to buy an already constructed property or an under-construction property. As per the RBI guidelines, you can receive a home loan of up to 90% of the property value from a lender.

Loan Against Property

This loan is available if you wish to purchase a plot of land or build a house. The first installment of the loan amount is disbursed when you furnish the relevant documents concerning the purchase of the land. Any subsequent disbursals will depend on the construction status of the house.

Plot Loan

If you plan for building a house on a plot, you choose this loan facility. Plot loans are different from home loans as these loans are granted for the purchase of a constructed property, whereas a plot loan or a land loan is only for purchasing the land (with no construction done).

Home Renovation Loan

You can take a home loan even for renovation or repair expenses. In this case, the tenure for repayment is generally shorter. This is because the amount granted for the home renovation is relatively less than for an entire home. However, the interest rate for home improvement loans is typically like that for a regular property loan.

Home Construction Loan

This loan facility is available if you need financing for construction purposes. This type of loan is granted only if you own a plot of land and plan to construct a house on it. Just as a composite loan, the disbursal depends on the stages of construction.

Bridge Loan

You can choose this loan if you have recently sold a house and want to buy a new one with the sale proceeds but need an additional amount. The loan helps in covering the gap between the purchase of a new house and the sale of an existing house.

Home Extension Loan

If you are planning to extend the space of your home, you can choose this loan facility. Under this form of lending, financial institutions typically disburse amounts that could cover up to 90% of the estimated construction expense. The sanction amount depends on the loan amount and the loan-to-value ratio, and this makes it different from a home renovation loan.

Step-up Loan

This type of loan is generally taken out by young professionals who have just begun building a career. In this loan facility, your initial EMI amount is lower. However, you can always increase the EMI amount with time, which is a salient feature of this form of loan.

Interest-saver Loan 

This is similar to a loan overdraft facility. In this case, your home loan account is directly linked to your bank. Any amount deposited in the bank account over and above the EMI amount is used as a prepayment, which helps you save on the interest due.

 

To apply for any of the above-mentioned home loan options, you can always take a look at home loan offers from the lending partners on Bajaj Markets. 

Through Bajaj Markets, you also get access to benefits such as pre-approved loan offers, home loan balance transfer facility, flexible repayment tenure, and a credit report, among others.

Here are some of the key factors you need to consider when choosing to apply for different kinds of home loans:

Credit Score

Your CIBIL score plays a major role when you apply for a home loan. Lenders check this score to understand how reliable you are with repayments. A higher score improves your chances of getting approved and may also get you better interest rates. It’s always good to check your score regularly and try to improve it if needed.

Loan Amount

Think carefully about how much money you need and how much you can repay comfortably. Don’t just look at the amount you want to borrow, but also consider your current income, expenses, and other loans, if any. Try not to borrow more than you can manage, as this can put pressure on your finances later.

Fixed Interest Rate

You’ll need to choose between fixed and floating interest rates. Fixed rates stay the same throughout your loan period, giving you predictability in repayments. But they may be slightly higher at the start. Look at your financial stability and the current interest rate trends before making a decision.

Equated Monthly Instalment (EMI)

Before you apply, try to figure out what your monthly payments will look like. You can use the EMI calculator available on Bajaj Markets. This will help you plan your monthly budget and choose a loan tenure that suits you. Make sure the EMI amount fits well within your regular income so that it doesn't become a burden.

Repayment Tenure

The loan tenure affects both your EMI and the total interest paid. A longer tenure reduces your monthly EMI, but you end up paying more in interest over time. A shorter tenure increases your EMI, but the overall interest paid is lower. Choose a repayment period that feels balanced and manageable.

Cost vs Benefit

Always compare the total cost of the loan with the benefits it offers. Check for processing fees, prepayment charges, and any additional costs. Also, consider the tax benefits you may get. Taking a moment to compare these factors can help you pick the loan that suits your needs best.

Though often used interchangeably, loans and mortgages serve different purposes and come with unique features.

Here are some differences between them: