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Home Loan
Planning a new home? Compare these Home Loan options first
Not all home loans are the same. This guide breaks down every type of home loan, from ready homes to self-construction, so you can pick the best one confidently.
Key takeaways
- Home loans vary based on purpose, repayment options and tenure.
- Standard home loans help you buy ready-to-move-in properties.
- Construction loans fund projects on plots you already own.
- Land purchase loans cover buying plots for future construction.
- Improvement loans support the renovation or repair of your home.
- Top-up and composite loans offer extra flexibility and ease.
Buying a home is a big deal—emotionally and financially. It’s not just about finding the right place, but also about choosing the right way to pay for it. That’s where home loans come in. But here’s the thing: not all home loans are the same. Some are built for buying ready properties, others for building your own from scratch. A few help you buy land or even give your current space a much-needed facelift.
With so many options, knowing what each loan type offers can save you time, money, and a lot of confusion. In this article, we break it all down:
Standard Home Loan
This is the most common type of home loan that’s taken out for purchasing a ready-to-move-in property. Some of these loans cover up to 90% of the property’s cost with repayment tenures that may extend up to 30 years. While the real interest rates vary with market conditions, locking in a lower rate early can reduce your overall outgo.
Home construction loan
If you own a plot and wish to build from scratch, a construction loan disburses funds in stages. These stages are usually synced to your construction milestones. The funds allocated for these are released only after civil estimates or construction invoicing, so that it can ensure that you pay interest only on the amount utilised by you.
Land purchase loan
For those acquiring new land to build later, land purchase finance covers up to 75% of the total plot value. The tenures for such land purchase loans range anywhere between 5 to 15 years. Since land values can fluctuate, lenders may require higher down payments as compared to Standard Home Loans.
Home improvement loan
Want to remodel your existing home? Home Improvement Loans are the answer you’re looking for. These loans are also called renovation loans and are drawn out to fund painting, repairs, extensions or modernisation of an existing residential property. These unsecured or minimally secured loans come with instant disbursal and tenures of up to 10 years.
Top-up loans
If your existing home loan suite no longer meets your cash needs—say, for unforeseen repairs or renovation expenses—a Top-up Loan lets you borrow extra funds over and above your approved limit. It shares the same collateral and usually also the interest rate structure.
Pre-approved Home Loans
Pre-approved Home Loans are a special kind of loans that come with a conditional offer letter, which indicates the maximum loan amount and tentative rate. With documentation already validated, final approval is faster once you select a property to purchase later. This gives you huge leverage with the property sellers when pricing the property.
Composite Home Loans
A Composite Home Loan mixes land purchase benefits and construction into a single facility. It simplifies the documentation and interest calculation processes, with funds released as per the approved drawdown schedule. These are great if you’re taking them for end-to-end projects, as they reduce a considerable amount of administrative hassle.
Comparison of Home Loans
The following table compares the various types of Home Loans you can avail:
| Home Loan Type | Loan Amount | tenure |
|---|---|---|
| Standard Home Loan | Up to ₹5 crore | Up to 30 years |
| Home Construction Loan | Based on construction cost | Up to 30 years |
| Land Purchase Loan | Up to 75% of the plot value | Up to 15 years |
| Home Improvement Loan | Up to ₹15 lakh | Up to 10 years |
| Top-Up Loan | Up to ₹50 lakh | Co-terminus with the existing loan |
| Pre-Approved Home Loan | Based on eligibility | Valid for 6 months |
| Composite Home Loan | Based on project cost | Up to 30 years |
How to pick the right Home Loan?
Here are a few simple steps that you can follow to choose the home loan that suits you the best:
- Assess your purpose and choose a loan that matches whether you're buying, building, renovating, or refinancing.
- Compare interest rates carefully as even a small difference can save you a significant amount over time
- Check for hidden charges and low prepayment penalties to avoid extra costs
- Evaluate tenure flexibility to balance lower EMIs with total interest based on your income
- Choose loans with easy documentation or pre-approval for quicker processing.
Conclusion
Your choice of the right home loan type must pivot on your goals. Be it a starter home, a dream villa, a plot for the future or a renovation upgrade. Compare each of the options based on their cost, convenience and flexibility, then lock in the best rate. With Millennials leading the buyer surge and Gen Z exploring opportunities, early research and swift action will ensure you land the perfect loan before the rates change again.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
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