Many a builder projects are launched on a regular basis and most of us dream of owning a property in some of these projects such as AIPL The Peaceful Homes, Experion The Heartsong, Parx Laureate Noida, BCC Bharat City, Orris Carnation Residency etc. This is where home loan plays an important role in our purchase decision. There are many home loan providers in the market to make your dream come true. But before you opt for any home loan provider, you need to consider various factors related to the property you are interested in buying and also be familiar with the salient features offered by the home loan provider. As a prospective borrower, you should be generally aware about the various terms used in the housing finance field.

1. Understanding Home Loans and their terminologies in India
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Many a builder projects are launched on a regular basis and most of us dream of owning a
property in some of these projects such as AIPL The Peaceful Homes, Experion The Heartsong,
Parx Laureate Noida, BCC Bharat City, Orris Carnation Residency etc.
This is where home loan plays an important role in our purchase decision. There are many
home loan providers in the market to make your dream come true. But before you opt for any
home loan provider, you need to consider various factors related to the property you are
interested in buying and also be familiar with the salient features offered by the home loan
provider.
As a prospective borrower, you should be generally aware about the various terms used in the
housing finance field. There are different types of loans available in market to meet your needs,
including:
Types of Home Loans:
1. Home Purchase Loans:
These are the basic form of home loans used for purchasing a home.
2. Home Improvement Loans:
These loans are given for implementing repair works and renovations in a home that has
already been purchased and/or occupied by the customer.
3. Home Construction Loans:
These loans are available for the construction of a new home.
4. Home Extension Loans:
These loans are given for expanding or extending an existing home - for example, addition of an
extra floor or room, etc.
5. Home Conversion Loans:
These loans are available for those who have financed the present home with a home loan and
wish to purchase and move to another home for which some extra funds are required. Through
home conversion loan, the existing loan is transferred to the new loan account including the
extra amount required, eliminating the need for pre-payment of the previous loan.

2. Understanding Home Loans and their terminologies in India
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6. Land Purchase Loans:
These loans are available for purchasing land for constructing a house.
7. Bridge Loans:
These loans are designed for people who wish to sell the existing home and purchase another
one. The bridge loans help finance the new home, until a buyer is found for the existing home
and sale proceeds are realized.

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Comparative study of loan options:
You should compare various loan options on the basis of the following parameters so that you
can arrive at an informed decision:
1. Purpose:
First analyze the purpose of taking loan. As explained above, banks/HFCs offer loans for
purchasing a home from builder/seller, for construction of own house or for the extension of an
existing house. You should focus on your purpose of taking loan while comparing the other
factors.
2. Loan Amount:
Generally, the maximum loan amount is limited to 80% to 85% of the cost of your home or
extension. The balance amount or the down payment is required to be arranged by you from
your savings. Depending on how much down payment you can arrange, you may select the
bank/HFC that can meet your balance requirement of funds.
3. Documents required:
You need to submit relevant documents to the loan provider for getting the loan. The
documentation varies for different categories - such as businessmen, salaried employees and
professionals. And although the basic documents required are same by various banks/HFCs, the
complete list can vary from bank to bank based on what category you fall in. So, consider the
required paperwork formalities while choosing a loan provider.
4. Prepayment charges:
Prepayment is the extra repayment, partially or fully, of the loan capital in addition to the
Equated Monthly Installment (EMI), prior to the maturity of the loan. Prepayment reduces the
interest burden on a housing loan and also number of EMIs. Banks/HFCs normally impose
prepayment charges that vary from lender to lender depending on the type of loan. Some HFIs
do not levy prepayment charges on variable rate loans. Fixed rate loans, however, attract
prepayment charges usually in the range of 1% to 2% percent of the amount prepaid. Some
banks/HFCs do not levy prepayment charge in case the amount prepaid is from borrower's own
earnings and not refinanced by another bank/HFC. So, choose a bank that offers a prepayment
clause with minimum consequence.

4. Understanding Home Loans and their terminologies in India
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5. Security:
Security refers to an asset provided by a borrower to the lender while taking a loan. The lender
can sell or convert this asset to his/her use if the borrower fails to repay the loan in full. Before
finalizing a bank/HFC, analyze the terms and conditions stipulated by various lenders and
choose the one with favorable clause.
6. Loan Term:
Banks/HFCs follow different policies for different loan terms. So, first decide whether you want
to take a long term or a short term loan, and then choose the lender that offers you the best
option as per your needs.
7. Rate of Interest:
Interest rates vary from lender to lender. So, you must compare the interest rates offered by
various banks and choose the lender that offers you best deal.
8. Insurance:
Some home loan providers team up with life insurance players to give you the benefit of
insuring your home loan when you take a loan. It is advisable to go with a lender that provides
you the home loan insurance benefit - so that you get peace of mind.
9. Processing & Administrative Fees:
The processing & administrative fee ranges between 0.5-2% of the home loan amount. While it
may seem like a small amount, it can add a considerable amount to your home loan cost. So,
choose the bank that offers you the lowest or nil processing & administrative fees.

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Which is the best loan option?
To choose the best loan option is a challenge in present day home loan market. A sound
analysis is the key mantra for selection of best available home loan option as per your
requirement. It is advisable to keep the above said key points in mind while finalizing your
home loan provider and to minimize home loan related tensions. After you have zeroed in on
the loan provider, submit a formal loan application along with supporting documents to the
loan provider. Here are a few additional tips while getting a loan:
1. Get a pre-approval letter:
This gives you a substantial leverage as you are then seen as a serious buyer by the seller of the
property. Also, having the loan approval letter in your hand will set a limit to the amount of
money you can commit to a property. This will help in identifying the right property.
2. Bargain for a lower rate of interest:
Housing finance institutions will reduce their `rack' rates for customers with a good credit
record. A bargain deal will easily fetch a home loan at somewhat lower rate (at times you can
get a discount of as high as 0.50%). Here again, get a confirmation of the rate (and for how long
it will remain fixed) via a letter.
3. Watch out for predatory lending:
Do NOT include false information on your home loan application to get quick approval. Also,
do not borrow more money than you need or can afford.
Source: National Housing Bank

6. Understanding Home Loans and their terminologies in India
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