Home Loan Explained

When you think of availing a home loan, you may think about a massive number of documents, high-interest charges and a bunch of regulations that do not make any sense to you. From repayment periods to reducing interest to rental yields to subvention clauses, purchasing a home may be highly daunting than exciting when you are looking to get a home loan. 

A home/housing loan, also called a mortgage, is the money amount borrowed by individuals, usually from companies and banks that lend money. The borrower must pay back the loan proceeds with interest in EMI over a time period that can differ between 10 and 30 years based on the loan nature.

Select a home loan that matches your requirements 

There are distinct types of home loans that are made to suit every unique situation. You can take home loans to purchase properties that are either personal or commercial in nature. Here are some of the distinct types of home loans you can avail yourself – 

Home purchase loan – You can purchase any home that is under your budget. 

Construction home loan – You can use this home loan to cover the building or home costs. 

Land purchase loan – You can use the loan to purchase a land piece. 

Home improvement loan – You can use this home loan to renovate and ameliorate your home. 

Home repair loan – Pay for the expense of restoration and repair of your home. 

Home extension loan – Enhance your amount to ameliorate your home.

Tax saving via home loans – 

Interest constituent charged on home loans is basically tax deductible meaning you can simply claim the expenditures when you file your income tax. 

What happens if you cannot make loan repayment?

When you avail of a home loan, a financial institution or bank accepts the property you are buying as security or collateral. This means that it retains all your legal right to property on the occasion of non-payment. 

What are the crucial parameters to factor in when placing an application for a home loan?


This is the money you borrow from a financial institution or bank. 


Duration is the time period you may take to repay the loan. Based on the nature of expected income, you can choose a period that well-suits you.  


Financial institutions and banks charge interest in exchange for lending services. The interest rate is based on the amount of principal and duration for which you will make the loan repayment. 

EMI component

You must repay the monthly instalments for the borrowing duration until the loan period ends. Every EMI is a combination of interests and principles. With every EMI, you repay more of the principal, and the interest cost will gradually fall. In India, settling down is synonymous with having your own home. In this busy umbworld, everyone dreams of having a picture-perfect abode where they can get solace. Purchasing a home is even becoming a big Herculean task nowadays owing to the increasing real estate price. A home loan is a simple way to finance your home purchase, given that it is an unwise decision to burn your whole savings to purchase a home or land.

Banks and other home finance establishments provide distinct kinds of home loans nowadays. Home loan demand has enhanced manifold in current years, and individuals have distinct expectations when it comes to home loans. To meet the requirements of distinct sections of society, various banks have come up with this specific concept of introducing distinct home loan schemes. To quote this better, several banks provide specially designed home loans for agriculturalists and women and loans exclusively for buying land. Note that to decide on your EMI before availing of a home loan, you must ensure to use an SBI home loan EMI calculator or HDFC home loan EMI calculator. Choose the online home loan EMI calculator as per your preference. 

Home loan types – 

Lenders provide home loans, not just for purchasing a home but even for a variety of reasons and purposes. Few of the popular kinds of home loans in the financial market include – 

Purchase of land loan 

Various banks provide home loans for land purchase purposes. Buying land is a flexible choice, which enables you to save funds as well as construct a home whenever your finances permit or just have land as per your investment. 

Home purchase loan 

The most popular kind of home loan is the loan for buying a new or preowned home. This loan is even commonly available and is offered by various banks in distinct variants. The rate of interest is either fixed or floating in nature and usually may go up to 12 per cent p.a. Also, 85 per cent of the overall amount is provided as loans by many banks. 

Home construction loan

This home loan is specially designed to allow you to construct your home as per your wish rather than purchase a pre-constructed home. The approval procedure for this loan kind is distinct as it considers the plot cost even. The loan amount on a home construction loan is determined based on the rough estimate of construction cost. The amount might be sanctioned at a single go or in several instalments. 

Get Access to: SBI home loan EMI calculator

A home expansion or home extension loan

Want another additional bedroom or balcony? No worries, few banks even provide loans for home expansion, including alteration of the current structure and new room construction. 

Home conversion loan

If you have already availed of a housing loan and have bought a home with it but looking to move to a new home, then you can avail of a home conversion loan. Just by transferring your current home loan to a new home loan, you can finance the purchase of your new home and do not require repaying the previous home loan. While this offers convenience, this specific home loan segment is also expensive. 

Home improvement loan

Repairs and renovation may include internal and external repair, construction of water tanks, painting, and electrical renovation, which makes your home appear better. 

Balance transfer home loan 

This option can be availed when you want to transfer your home loan from one bank to another owing to reasons like a lower rate of interest or better services offered by another bank.

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