What are home loans?
When an individual borrows a certain amount of money from a bank or any money lending institution at a particular rate of interest that needs to be paid in the form of an EMI every month, it is called a home loan. Home loans can be taken up either for personal use or for commercial purposes. Whatever the use might be, the bank or the money lending company registers the property as security. In any situation when the borrower of loans is not able to get the money back to the bank, the lender has legal rights to recover the outstanding loan amount by selling off the property.
When homebuyers decide to opt for home loans, they have two choices-
- Ready-to-move-in flats/house or an under-construction apartment/house
- Residential plot
The usage of loans towards a build-up property is clearer in comparison to a plot of land.
Let us look at home loans for some more details regarding home loans.
Borrowers of home loans have the option of choosing a suitable rate of interest from the following options-
Fixed, floating, partly-fixed, partly-floating
You can also get income tax exemptions if you are availing of home loans. So if you are planning on buying luxury flats in Chennai, it is time to avail a home loan from a bank or a money lending institution.
What are land loans?
Land loans are somewhat different from home loans. It lets the borrower of the loan make money for purchasing the land. A number of banks and financial institutions offer land loans.
There are three types of land loans you can choose from-
Land loans can also be a flexible form of investing money which means you will be able to make use of this plot of land for residential purposes. But the process of applying for a land loan is a little difficult in comparison to mortgages.
Are there any similarities between home loans and land loans?
If you are concerned about the commotion regarding home loans and land loans, then let us assure you that there are many similarities as well.
Home loans and land loans have some basic similarities such as the application process, terms and conditions, and EMI options. Both the nature of applying for the loan and its type have similarities. But land loans are issued for smaller tenures in comparison to home loans.
What about the differences between home loans and land loans?
Whether you want to avail a loan for luxury flats in Chennai, look at Mannivakkam house for sale, or buy land in Mannivakkam, you need to understand how these loans are different from each other.
Any residential Indian citizen or non-residential Indian (NRIs) can apply for home loans. The difference in the application process is marginal.
NRIs however cannot apply for land loans. Only residential Indian citizens are eligible for land loans.
There is a lot of flexibility when it comes to home loans as mostly all constructed and under-construction residential buildings pass the criteria. Land loans on the other hand don’t have much flexibility.
Land loans are more rigid and only cover specific kinds of land. The criteria that are applicable for land loans are-
- Residential plots
- Non-commercial plots
- Non-agricultural lands
- Land located near corporation limit
- Land which falls outside villages and industrial areas
In case you want a home loan to buy luxury flats in Chennai, you can apply for a home loan that covers 90% of the total value of the property. This is extremely helpful in case you don’t have in-hand money to pay for your property. Home loans work as great cushions in the initial stages of investment.
But the picture is different if you want to buy a new plot of land. Whenever you are opting for land loans, remember that you can only avail 75% of the total price of the property.
Some people argue by saying there is no difference in the rate of interest when it comes to home loans and land loans. But we have conducted some research and it is evident that there is a difference in the rate of interest.
Land loans can charge you 0.75% more interest in comparison to home loans. Remember that you are borrowing money in lakhs or more. So any small percentage matters a lot.
There is a glaring difference between the tenure enjoyed by home loan consumers and land loan consumers.
While home loans can be paid back within a long tenure of 30 years, land loans tenure can be pushed to a maximum limit of 15 years.
The benefits of availing a home loan are many. You can grow your funds
As stated previously, you can save a good deal of money from income tax by availing of home loans. So even if you are fully capable of funding your new house, we would suggest having a chat with your accountant regarding the tax exemptions. You will also be able to invest these funds to get good returns.
If you are facing a liquidity crunch, opting for a home loan to buy property is always better than personal loans. Simply because home loans are issued at a lower rate of interest in comparison to personal loans. So why risk losing your own funds when it can save you from other uncertainties in life.
Home loans and land loans are somewhat similar in a couple of aspects. But there are some major differences between them. Make sure to conduct your own research and consult with financial advisors to find out what is the best option for you.