Are you planning on buying your own house? Or are you planning on buying a second house for investment purposes? In any such situation, it is very well known that you need to take up a loan. This loan, also called as Home loan explained in layman’s terms simply means an amount of money you borrow from a bank or any other such financial organization to purchase a house.
Not just for purchase, you can also take up home loan for other purposes like while you are renovating your house or are making repairs to it or are planning on extending it. In all such circumstances you are eligible to get a home loan to ease your financial burden.
Even if the term in itself might sound very scary and big, once you get to know the basics of Home loan, you will be at ease while undergoing the process. For starters, let us start with some of the basic factors which are of utmost importance when you are taking up a home loan.
The first being Principle Amount, which refers to the amount of money you will be borrowing from the financial organization. Next, comes the term or the duration of time you will have to return the borrowed money. Third comes the frequency, which refers to how frequently you will make the payments to repay the loan. Next comes the collateral, which refers to the asset that you give to the lender for security purposes till you repay the loan. Last, comes the interest rate which you need to pay to the lender. These are the five basic factors that play a major role in the entire process of getting a home loan.
As mentioned previously, there are various conditions and situations wherein you can get a home loan. According to the situation, the type of home loan varies. The types of home loans available are:
- Basic Home loan
This is the most common and popular loan which can help you get your dream house. Almost all financial organizations that give out loans have this facility available, and so you get a wide variety of organizations to choose from depending on different factors.
- Home Construction Loan
This type of home loan is suggested specifically when you are constructing your house. Various banks provide this special home loan which varying conditions.
- Home improvement loan
This type of home loan is also called Home Renovation loan and can be taken for different situations, be it for refurbishing your interiors, or getting your house repainted or upgrading your pluming or electrical system, etc. This type of loan provides the borrower with a good range of options and is advised when you are planning on renovating your house.
- Home extension loan
If you have the need to extend your house, be it extending by a room or a floor, you can take up this home loan.
- Plot loan
This type of a home loan, also called land loan is take up when you are planning on buying a piece of land to construct your home. A good number of banks give this type of a loan, with multiple advantages, so you can choose from them based on your needs and wants.
- Composite loan
This is a special type of loan you can get for when you are planning on buying a plot and constructing your dream house on it. Both the expenses are covered by this loan, making it different from the plot loan and construction loan.
- Home loan balance transfer
There may arise situations where you will find that you are not happy with the current lender or financial organization you have borrowed money from. In situations like these, you can transfer the home loan to another lender you feel you will be more comfortable with. Such flexibility helps you go through the entire process smoothly.
Now that you know what the different types of loans are, the next thing to know is how you can calculate your home loan. This is very simple, and it can be done using a home loan calculator. What is a home loancalculator? It is simply a tool or method that helps you in calculating the loan installment, that is the EMI you will have in your home loan. Equated Monthly Installment, also known as EMI is the a part of the amount of money you will be repaying back to the lender on a continuous basis till you have completely paid off your loan.
A home loancalculator is very important in helping you make good and informed decisions while you are taking up a home loan. Various banks and financial organizations have different criteria and factors that weigh differently on the home loan. You can study these properly and use the home loan calculator specific to a given bank to get an estimate on your EMI. Different banks have their own calculators, which is very helpful in differentiating the banks while choosing which bank you must go to for getting the home loan.
Home loan apart from being a means of lessening the sudden financial burden has many different advantages. The biggest advantage you should take into consideration is the tax benefit you get to avail after taking up a home loan. A part of the principal amount that you have to repay to the bank can be deducted from the amount that you need to pay taxes for. If you are getting a home loan for your second home, you have the added benefit of getting to deduct the entire amount of housing loan interest.
Long repayment duration is also one of the biggest benefits of home loan. The tenure period for a home loan is amongst the highest amongst all kinds of loans. Home loan has helped millions in owning their dream houses. It is a popular belief that owning your own house is always better than renting, which in the longer turns out to be very expensive. Home loans can help ease this monthly burden of paying the rent and living in someone else’s property.