Home loan types and definition
Most of the people have a notion in their mind that home loan only provide you financial aid for buying a new home. But in reality most of the bank offers different types of home loans depending upon the need of every individual. After reading this article, I am sure you will be more resourceful about the different types of home loans offered by the most of the banks.
What is home loan?
There are different types of loan present in the market and home loan is one of the. In lay man language, a home loan is simply taking money from a bank or a financial company for buying a new house on a fixed interest rate and for a specific period of time. Few years back, this definition was enough to define the meaning of home loan but now as the competition has increased in the banking sector, the definition and meaning of home loan has changed completely. Now, home loan has broader meaning and offers you loan for your even small need regarding your home. To understand this concept better, let us have a look on the different types of home loans available in the market.Types of home loans in the market
There are different types of home loan available in the market. Basically, we can divide it in the following major categories-Home purchase loan
This is the basic type of home loan which is offered by every bank. Home purchase loans are meant for those people who are planning to buy a new house. Most of the bank offers about eighty percent of the actual cost of the house in the form of loan. In other words, if the cost of your house is Rs. 100, than most of the bank will assist you with a loan amount of around Rs. 80. So, you have to pay only Rs. 20 from your own pocket at the time of purchasing the new house. Home construction loan
Most of the people think that what if I don't want to purchase a house and instead I want to construct it according to my plan? For those people home construction loan is the solution. Only thing you have to do is to just made a roughly estimate of the cost of construction of your home and then to apply for the same. Rest will be done by your bank or financing company. Experts from the loan providing authority will analyse your application and intimate you about the approval or disapproval of the same.Home improvement loan
Do you own an ancestral house and want to renovate it but lacks the fund? Then you don't have to worry as home improvement loan is the perfect solution for your problem. These are meant for persons like you only who already own a home but want to repair it.Home extension loan
Do you love to be in the joint family but the space of your already owned home does not allow you the same? Then, you need not to worry, home extension loans are meant for you only. Home extension loans are given to those customers who own their house but want to extend it like another bedroom, dining hall etc.Home conversion loan
This is also a very great home loan facility provided by some banks. Home conversion loans are given to those customers who already have a financed home and wishing to own another house.
Home conversion loans provide you the option of the transfer of your already taken loan to the new house and also includes the extra amount that you have to pay. The best thing is that you don't have to pay the amount of your previous taken home loan instead it will be included in the loan amount of your new house. The only thing that bank will ensure is that you are capable of paying the increased loan amount.Land purchase loan
This type of loan can also be included in the home loan if you are planning to buy a new land for the construction of your dream house. Some banks also offer the land purchase loans for the purpose of investment.Bridge loan
Are you planning for shifting to a new house but not getting the buyer for your existing house? Then, you don't need to worry about this as bridge loans are the mere solution for your problem. The bridge loans help you by financing your new home until you get the purchaser of your old house.
Conclusion-
This article was intended for providing you the basic knowledge of different types of home loans so that you can decide yourself that which is best home loan? If you still have any query or doubt then you are free to leave a comment below. I will be happy to respond to your queries.
Hi Aman,
Can you tell me something about prepayment of home loan. Will the bank charge Pre payment charges.If yes how much the bank charge.