With the prices of properties going up, consumers are increasingly sourcing money through Home Loans. To cater to this demand, banks and financial institutions have introduced loans of various kinds to suit different needs and customer profiles. You must pick a loan based on your requirement and financial goals.
Let us take a look at the various types of Home Loans available.
Pre-Approved Home Loan
Pre-approved Home Loans are an in-principle sanction offered to you by the bank. These loans are offered on the basis of your repayment history, income and Credit Scores, which reduces hassles for the candidate. The loan processing usually takes 48 hours. With pre-approved loans, you can find a property to fit in that budget. However, such loans are offered for a stipulated period and need to be availed within that timeframe.
Pre-approved loans are available at a relatively lower interest rate but involve a certain amount of processing fee on availing it.
Fixed Interest Rate Home Loans
Fixed rate Home Loans keep the rate of interest same through the entire tenure of repayment. The interest rates are unaffected by the market conditions. The fixed loan EMI outgo each month helps in budgeting and planning for long term. This type of loan ensures financial security as they are not impacted by fluctuations in the market. On the downside, the interest on a fixed rate Home Loan is usually higher than that of a floating interest rate Home Loan.
Additional reading: Home Loan Handbook: All Questions Answered
Floating Rate Home Loans
Floating rate Home Loans are subjected to fluctuating interest rates due to changing market scenarios. While floating rates are composed of two elements, the base rate and the floating component; change in the base rate makes the floating rate vary. If you are looking for a Home Loan in a rising inflation scenario, floating rate Home Loans are best avoided as interest rates usually have an inverse relationship with inflation parameters. The changing interest rates also fall heavily on your financial plans as the uncertainty can take a hit on your other financial commitments.
Joint Home Loan
A joint Home Loan is one that can be taken by more than one person. It can be taken with any family member including your spouse, parents, siblings etc. The repayment of the loan has to be made from an account held by both and both are held responsible in case of delay or default. While offering joint Home Loans, banks consider the income of both parties and hence the loan offered is often of an amount higher than that to an individual. A joint Home Loan would provide tax benefits to both the loan account holders.
Home Improvement Loans
If you require fund for renovation and repair, you could go for a home improvement loan. Any Home Loan borrower who has been making timely repayment for a year can seek such a loan but the money has to be used towards construction and renovation work only. With a lower processing fee and lower interest rate compared to Personal Loans, home improvement loans can come to rescue when faced with a cash crunch for repair and maintenance.
With the advancement of technology, Home Loans can be availed quickly and with less hassles. However, before you jump the gun, make sure you go through the fine print to identify the product that best suits your interest.