An Overview Of Types Of Home Loans

Home equity loan is a loan that can be extremely useful to those who are in need of cash. You as a homeowner can use the equity against your home as collateral to secure a loan and meet financial requirements of any kind. You can use the loan to finance a medical emergency, to fund your childrens college education or to meet your growing business needs. The home equity loan can offer welcome relief when the going gets tough and gives you an opportunity to set things right.

Securing A Home Equity Loan

A home equity loan can be secured from financial institutions such as bank. The eligibility criteria are the same as the eligibility criteria for home loans in India. The person needs to fill in an application form with the relevant details and submit it along with the required list of documents. Most banks offer customers convenient online loan application procedures.

The banks will consider granting the home owner loan after assessing the loan application, the market value of the land, repayment capacity of the applicant and the required loan amount. There are certain conditions such as only legal title owners of the property can apply for the loan. Another condition is that the property should not be involved in disputes of any kind.

Banks will grant an amount ranging from about 40 70percent of the market value of the property. Applicants may secure as much as Rs 10 15 lakhs which can be repaid within 10 15 years. The repayment is done via EMIs equated monthly installments that go towards repayment of part interest and part principal.

Home equity loan can have a fixed interest rate or a floating interest rate. Fixed interest rate loans are preferred by some as they are less risky than floating interest rates. You need to make sure that it is a true blue fixed interest rate loan as some banks use certain clauses perhaps in the fine print that will give them the authority to reset the fixed interest rate periodically. You do not want to end up paying a higher interest rate than you expected.

The floating rate is considered risky as the rate can fluctuate depending up on the benchmark rate and you may face a hike in the rates that you possibly cannot afford. You need to study the interest rate trends, be sure that the interest rates are indeed taking a dive and then opt for a floating rate. Check out home loan India interest rate and clear your doubts about interest rates.

Home equity loan is provided by banks such as ICICI, State Bank of India, HDFC, IDBI, Union Bank of India, UCO, Bank of India, Standard Chartered, and Citibank. You may check out the rates and terms offered by the various institutions before you decide to secure a loan from one of them. Read about the eligibility criteria and get the necessary documents ready before you apply for a loan. You need photocopies of the property documents, the property valuation report stating the current market value of the property as declared by the valuer appointed by the institution.

Make sure you understand every tiny detail if not, you can always consult a qualified professional who will help you make the right choice. Find out if there are any pre payment penalties and what the processing and administrative fees are. You need to use the home equity loan only for a legal purpose and cannot use it for speculation.

Home Loans Types Of Home Loans Home Construction Loans

Home construction loans are short term home loans that are obtained to build a home. They are used to fund the costs associated with the construction of the home. These loans are different from other kinds of home loans and their rates and terms vary considerably. They are usually interest only loans that are advanced at intervals to the builder on periodic inspection of the work under progress.

Home construction loans are not as easy to obtain as home purchase loans. These loans are usually converted into permanent loans after the house has been constructed.

Types Of Home Construction Loans

Construction Only Loans: This is the more popular kind of loan where the loan only covers the cost of construction. The loan is short term ranging between 6 12 months and is an interest only loan. You only pay the interest during the construction of the home. The loan is due when the construction has been completed. You will probably need to scout for a permanent loan after the construction loan has been paid. This will give you the option to select the permanent loan at rates and terms that you are comfortable with.

Construction to Permanent Loans: This is two loans rolled into one. You get a construction loan as well as a permanent loan at the fee of one loan. You also face only one closing charge but you do not get to select the rates and terms of the permanent loan.

Tips On Securing Home Construction Loans

While securing home construction loans it is necessary to consider certain basic factors. Take into consideration the cost of the site or plot of land, the design of the home and get an accurate estimate of the construction costs. You need to determine the total amount of the loan needed and work out the EMI. Consider if the EMI is affordable and then you can shop around for the firms offering you these home loans at rates you are comfortable with.

The total amount of the loan that you can qualify for depends on several factors. Residency status, age, profession, dependants, liabilities, assets, monthly income, collateral offered and the future value of the property are usually considered.

Carefully determine the processing and administrative fees amount too as in some cases they may work out to up to 3percent! Find out if there are any pre payment penalties associated with the loans and if so find out the percentage charged. You may also have to shell out a commitment fee depending upon the policy of the institution of your choice. Most institutions expect down payment of about 15 20percent of the total value of the loan. Remember that if you already own the plot it may count as equity towards the intended loan. In such home loans, the loan to value ratio and the loan to cost ratio are considered.

Getting home construction loans can be rather easy if you are prepared and knowledgeable about the process. Make sure you are eligible for the loan and that you have prepared the documents that have to be submitted along with the loan application process.