Home Loan interest rates have been reducing for a few months and have reached an all-time low due to a series of Repo Rate cuts by RBI. So, if you are planning to purchase your own home in the near future, then this is probably the best time for you. This is because, as per the current rates you are eligible to get the loan at the cheapest rates. Your interest rate can even be further reduced if you are a women borrower or to get so, you can also put a female co-applicant to your home loan application.
Different types of Home Loan available in India
- Regular home loans: This is the most common type of home loan available in India. Using this home loan you can purchase a flat, bungalow, villa, or any other property which is for residential use. The loan allows you to purchase both- a newly constructed or old property. The loan even allows you to buy a property which is under construction. For under-construction property, payments are made in instalments to the builder depending on the phase of construction. The interest rate charged for a regular home loan is generally fixed or floating and it’s up to the borrower to select one for themselves.
- Home construction loans: If you are not in favour of buying a pre-constructed house, and want to customize your own home then this loan is for you. A home construction loan is best to avail for those who own a plot of land and want to construct a house on that particular plot. If you want the cost of the plot can also be included in the home construction loan( only in case when the plot is purchased one year back). The loan amount which you get through this loan is determined based on the estimated overall house construction cost (which you have provided to the bank). The loan amount can even be disbursed in a single lump sum or in instalments as construction proceeds (as per your requirement).
- Land purchase loan: A land purchase loan is one of the home loan options which helps you to purchase a plot of land on which you can construct your house. This helps you to customize your dream home as per your requirements. Moreover, if you just want to purchase a land, you will need a loan amount which will be comparatively less to what you will need to purchase a house. And if the loan amount is low, you can repay it in less time and can further take a home construction loan to construct a house on that land. You may also purchase the land solely for investment purposes and sell it later to earn a profit.
- Home improvement / Renovation loans: When you are living in a house for years you may find the need to renovate it, remodel it or paint it as per the growing requirements. ? It can even be a simple fixing of the leaking ceiling or an urgent wiring fixing, a home renovation loan provides you funds for all this. You can even take this loan to have a new interior of your home. The loan amount approved for this loan is generally lower than what you get through a regular home loan, but it is sufficient for the remodelling and renovation work.
- House Expansion Loans: Banks also offer loans for the purpose of expanding or extending a house. This includes alterations of the present structure, construction of a new portion in the house, or constructing more floors/rooms.
From where to take a Home Loan?
If you are looking for a home loan then you can either take it from a bank or from a housing finance company. And if you will ask which one is the best? Then the answer is- The public sector banks provide home loans at the lowest rates. The one on which the bank’s home loan interest rate depends on is- the Repo rate.
This is because the interest rates on home loans offered by banks are now linked to an external benchmark. This has been implemented as per the RBI guideline. This made most of the banks opt for the RBI’s repo rate as the external benchmark. And hence, RBI’s repo rate remains the one to which all floating rate loans are linked. The interest rate linked to the repo rate is RLLR (repo rate linked lending rate). This RLLR directly depends on the repo rate and the bank’s margin. However, banks are still authorized to charge the margin and risk premiums over and above the external benchmark rate.
- You might be confused with all the above statements, so let’s make it simple for you to understand- To lend you money banks need to borrow from RBI, So, when the banks borrow funds from the RBI, it is at the repo rate.
- When RBI reduces the repo rate, banks lend you at a lower rate.
- For lending based on RLLR, such as the home loan interest rate will increase or decrease based on the repo rate.
How can you apply for a home loan?
- Search for a lender who is offering a home loan at the lowest rates, for this you need to compare among all the options available in the market.
- Check for your eligibility with them.
- Know the processing fees, pre-closer, prepayment, terms and conditions associated with the loan form the lender which you have selected.
- Apply online for the home loan with the lender who suits your requirement.
- Keeps the required documents ready.
- Sign the loan agreement only after reading the fine prints carefully.