The main types of home loans

Home loans are loans which are given for the purpose of buying or building a new home. One of the basic necessities of life is shelter and there comes a point in everyone’s life where they aim at investing in their dream home. Many people who wish to accomplish this dream of buying a home are unable to do so because of the massive amount of finance required for it. Thanks to banks and a few other financial institutions which now exist, people receive assistance in the form of home loans. In India, every commercial bank offers its customers home loans; the rate of interest is usually standardized by the Reserve Bank of India. Sometimes, however, there is a possibility that there are slight differences in the rates of interest which are charged by different banks.

Many of the banks come up with schemes on their home loans and other loans. The main aim of these schemes is to attract more customers to take the initiative of investing in a home. Some of the banks offer loans even for renovations purposes. Based on the purpose which they are used, and several other factors, some of the common types of home loans which are offered in India are as follows:

  1. Home loan for construction of a new home: These loans are different from the home loans which are given for purchasing a new home. The purpose of these loans is to financially assist an individual in constructing a new home. People often confuse this to be the same as a home purchase loan.

  2. Home renovation loan: A home renovation loan is made use of in case an individual wishes to renovate or make changes in the home which he already owns. Renovations include any kind of changes or alterations which are made to a home. It is very important to note that renovations to a home require the permission of the municipal authorities. This also means that the banks require people to first get approval of the concerned municipal authorities before they apply for a home renovation or home extension loan.

  3. Home purchase loan: A home purchase loan is the conventional home loans that most people are aware of. These loans are given for the purpose of buying a new house, usually an apartment. Home purchase loans should not be confused with home construction loans because they are not the same.

  4. Loan for land purchase: These loans are given for the purpose of purchasing plots of land. The land can be purchased for construction purpose in the near future. This is one of the most common types of loans which are being availed by the public in India.

  5. Bridge loans: Bridge loans are given to individuals who wish to buy a new home and sell off their old one. The bridge loan comes in handy to buy a new home somewhere else while they still wait for a buyer for their old home.

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