Living in one’s dream home is the ultimate and unifying goal of every family in India. However, it is nearly hard for people to pay the price of buying a residential property out of pocket due to the skyrocketing real estate costs.
Home loans and home construction loans are the two main kinds of credit products that banks and non-banking finance firms offer to assist people in realizing their property ambitions. Both of these loans provide huge financial assistance to people who desire to buy a house.
But what distinguishes these two loan types from one another? What qualities, qualifications, and loan categories should you select? In this article, we provide answers to all of these queries. Let’s get beylikdüzü escort going.
What are Home Loans and Home Construction Loans?
You can select a home loan if you’re wanting to take out a loan to buy a property that is already built, is being built, or hasn’t yet been built. On the other hand, you can apply for a home construction loan if you want to build a residential home for your own use or as an investment.
What do Home Loans and Home Construction Loans Have in Common?
Despite the fact that both of these loan products have different goals and purposes, there is some similarity. Regardless of whether you apply for a home loan or a loan for home construction, lenders follow a similar loan sanction process. The co-applicant rules and repayment alternatives are also the same for both.
Home Loans vs Home Construction Loans
Documents Required:
Compared to applying for a Home Construction loan, applying for home loans is a comparatively simple process.
- Home Loans: The applicant must submit the necessary KYC documentation, income documentation, and property documentation for verification.
- Home Construction Loans: In addition to the documents stated above, the applicant is also required to provide other paperwork. Additional paperwork is required, such as the plot’s legal authorization from the relevant local authorities, municipal corporation approval, the proposed building’s blueprint created by a licensed architect or civil engineer, property tax records, and more.
Maximum loan tenure:
The length of time it takes to pay back a loan, including interest, is known as the loan tenure. Smaller EMIs are associated with longer terms, and vice versa. Your monthly spending options may be restricted if you took out a larger loan with a shorter term and a higher EMI.
- Home Loans: With a 30-year maximum payback period for home loans, borrowers have plenty of time to pay back the loan balance.
- Home Construction Loans: Home construction loans have substantially shorter maximum repayment terms, ranging from 10 to 15 years. It may occasionally even be less than that, depending on the lender.
Interest Rates:
- Home Loans: Home loan rates are quite competitive due to a large number of banks and NBFCs that offer them. But keep in mind that the borrower’s eligibility has a big impact on the home loan interest rate. You can get home loans with cheaper interest rates if you have a strong credit history.
- Home Construction Loans: Construction loans are less common than home loans. As a result, you’ll probably pay a higher interest rate.
Loan Sanction & Disbursal:
- Home Loans: Within seven working days of receiving approval, the lender will send the sanctioned money to your bank account or the builder’s account. The entire loan amount will be paid to you in one lump sum.
- Home Construction Loans: Here, the loan amount is given to you in multiple installments. Getting the full sum typically takes three to five installments. The timing of the payments is coordinated with the stage of the building. Also keep in mind that if development doesn’t proceed as planned, the lender may stop/cancel future installments.
Loan Amount:
- Home Loans: When the cost of the purchased property is less than Rs. 30 lakhs, borrowers may obtain up to 90% of the property value as a loan amount. Borrowers might receive up to 70 or 80 percent of the market value as the loan amount for loans with greater values.
- Home Construction Loans: In these situations, lenders provide up to 50 or 70 percent of the total anticipated cost of development as the loan amount because the project has not yet been built.
Tax Benefits:
- Home Loans: Home loans allow borrowers to reduce their income taxes. The principal borrowed as well as the interest paid is both tax-deductible by the borrower up to the allowable limitations.
- Home Construction Loans: In this case, the borrower is not eligible to get any tax advantages until the property completion certificate is submitted. You cannot claim any tax benefits until construction is finished, even if you have started loan repayments while the home is still being built.
Conclusion:
There is no doubt about which loan product to select because both of these loan categories have distinct functions. A home loan is the best option for you whether you want to buy a built-in property or let a builder handle the construction. On the other hand, apply for a home construction loan if you intend to handle the construction yourself. The application, loan acceptance process, and payments are the same for both, despite the variances.
