What is a home loan? Explain the types, eligibility and functions.

What is a home loan? Explain the types, eligibility and functions.

dreams of buying a new house. Being a home owner determines your status in society and reflects your financial achievements in India. Fulfilling this dream requires a lot of your hard work. A home loan will help you achieve your dream of buying a home by providing you with the financial assistance you need to buy a new home.

 

What is a housing loan?

A home loan is an amount that a financial institution lends to you to help you buy a new home. Here, the property you are buying becomes collateral for the loan. The amount borrowed from the bank has to be repaid with interest in the form of EMIs within the specified period.

You can get a housing loan for the purchase of a new house/apartment or a plot of land on which to build a new house, as well as for the reconstruction, repair and extension of your existing house. Many banks and home finance companies offer home loans.

 

Types of housing loans:

The different types of home loans offered by various financial institutions are as follows:

 

1) Loan for building a house:

 

This type of loan is useful when you have a plot of land and plan to build a new house on it. A home construction loan will provide you with financial assistance during construction.

 

2) Loan for housing extension:

 

Suppose you already own a house and are willing to expand your existing house by building another floor or adding an extra room to accommodate your growing family day by day, then a home extension loan will help you a lot. This type of loan provides financial support when you need to extend your existing home.

 

3) Home improvement loan:

 

When you are planning to renovate your house and need financial support, you can apply for a home loan, i.e. a home improvement loan. Renovation of the house includes painting the interior or exterior, replacing the wiring, waterproofing the ceiling, performing any plumbing work, etc.

 

4) Transfer of housing loan balance:

 

Suppose you find the interest rate of your existing home loan too high or maybe you are not satisfied with the services provided by your existing lender, you can transfer your remaining home loan balance to one of the best home loan lenders who offer you the best interest rate rate and satisfactory services.

 

5) Compound housing loan:

 

If you need a loan to buy land and also to build a house on that land, then a compound home loan will provide you with financial support for both purposes with just one loan.

 

Home loan eligibility:

Every home loan financing company and bank maintains a list of home loan eligibility criteria. The criteria that are examined are as follows:

  • Applicant’s age
  • Type of employment, whether self-employed or paid
  • Minimum annual salary
  • Mortgage
  • Margin Requirements
  • Assets and liabilities
  • Financial stability
  • Occupational safety
  • Residential status i.e. whether Indian or non-resident of India
  • Your credit history. Your credit score must be 750 or higher to be approved for your home loan.

Knowing the eligibility criteria when applying for a home loan online or offline makes the journey hassle-free.

 

Documents required for a housing loan:

The documents required for the best home loan are as follows:

 

For farmers:

 

Completed application form together with a photo
Proof of identity
Address proof
Bank statements for the last six months
Check for processing fee
Copies of agricultural land title deeds that will represent ownership of the land
Copies of agricultural land title deeds representing the crops being grown
Loan statements for the last two years.

For paid borrowers:

 

Application along with photo
Proof of identity
Address proof
Bank statements for the last six months
Check for processing fee
Latest Payroll
Form 16

For self-employed professionals:

 

Application form with photo
Proof of identity
Address proof
Bank statements for the last six months
Certificate of education
Business proof
Income tax returns for the last three years and business profile
Profit/loss for the last three years
Balance sheet

 

Home loan features:

 

In addition to the interest rate, you should also consider the following features when applying for a home loan

 

Overdraft facility:

With this facility, you can access additional funds in your loan; in case you require extra money, it will be up to the amount of additional installments. An apartment with a fixed interest rate housing loans do not provide this option.

Parental leave:

 

With this function, you can reduce or postpone loan repayments for a certain period, which is agreed after the birth of a child or the adoption of a child. Interest is usually charged on your home loan during this time period and there may be a surcharge for using this option.

 

Additional repayments:

You can use this option to increase your home loan repayment and this will reduce the interest rate of your best home loan and even reduce the repayment period of the loan. Few lenders apply a limit on additional repayment for a set period or do not have a provision for additional repayment.

Repayment holidays:

Many financial institutions provide full or partial repayment holidays that are for a certain period of time. You don’t have to pay during this repayment period, but the interest rate still applies to the amount of your home loan. To be able to use this option, you must either pay a deposit or increase the amount of the installment.
Be aware of some of the above features to opt for a satisfactory and instant home loan.

 

Conclusion:

Thus, a home loan plays a major role in your life to help you fulfil your dream of purchasing a house by providing you with financial support. And the above information provides you with a comprehensive guide to the selection of the best house loan as per your requirements.

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