Understanding various options for home loans

Harshil Mehta

Home loans are all about making the right decisions, after sieving through a whole host of options. This is not just relevant when choosing the right home, but is equally important in finalising the best loan to suit your requirement. Considering a loan is probably the longest financial commitment for most of us, a systematic approach in the making is important.

The process of seeking a loan can be simplified if one knows the art of acquiring the right loan for the right purpose. Loans are relatively simple concepts. However, before one heads out on the house hunt, it helps to get the basics right.

Let us take a look at the various types of home-related loans available for the consumer in order to make a well-informed decision:

• Home loan

This is where your dream of owning a house begins. The loan can be availed for the purchase of a ready or under-construction house or apartment. The loan amount, interest to be paid, and tenor can be decided as per lending company’s policies, price of property and the individual’s income status. Income tax benefits are also associated with home loans.

• Home improvement loans

Home improvement loans come handy for renovations/repairs to be done on existing property. It includes repairs, re-modelling, energy savings related items (permanent in nature), a new kitchen, a new bathroom, a terrace, an extension or general property improvements etc.

• Home construction loans

Since most of the Indians prefer to buy a plot and design their own independent home, home construction loans are fast gaining popularity.

There is a huge variation in home construction loans available in the market for the consumers. This adds up to the choices that one has while building a whole new house or to finance the construction of a newly acquired home.

• Land loan

Plans of building one’s own home is not a distant dream as one can own a piece of land or a plot as a thoughtful investment. It will also protect you from the rising rates of properties. It is here that special land/plot loans come handy. There are very few companies that provide loan for financing the purchase of a plot.

• Plot and construction composite loan

A one of a kind loan where the housing finance company will not only provide you with a loan for the plot you chose to buy, but will also take care of the construction costs.

• Loan against property

Loan against property is a type of loan in which the borrower uses the equity of his or her home as collateral. Your property is a valuable asset. It is your right to utilise this property to procure loans for other important needs like acquiring an asset, business needs etc. Any residential and non-residential property can be considered as long as the mortgager is a title holder of the said property.

Each of these loans vary in eligibility, maximum loan amount, maximum tenure and terms of acquiring the loan. A thorough comparison is mandatory to make the best decision.

The author is Chief Executive Officer, DHFL. The views expressed in this article are his own