How Does a Beginner Defines Home Loan?

No doubt, home loan finance requires the longest payment when one has to pay EMI towards it for 25-30 years. Home loan is a sensitive approach and needs to be understood first, especially for a newbie. Here is a complete guide to keep an eye on and follow it-

What is Home Loan?

It is the financial help that an individual avails from the financial institutions such as banks, housing finance companies, and NBFC’s with the condition that he will repay the borrowed amount at a certain rate of interest in the form of EMI every month for a fixed tenure. For security purposes, the property is kept as a mortgage, and a legal agreement is made between the lender and the borrower which becomes void upon the full payment of the debt. The financial institutions can recover the outstanding amount by selling the mortgaged property if the individual cannot pay the debt as it is their legal right.

Varieties of Home loans:

• Home Purchase loan
• Home Construction Loan
• Land Purchase loan
• Joint home loan
• Home Loan Balance Transfer
• Top-up Home Loan

One can apply for a home loan through online and offline methods. The online method is easy and convenient as the pre-approved home loan offers are made available to the customer and the loan is approved instantly by just clicking and accepting the offer. In the case of offline application, one can reach the nearest bank and apply for the loan and can get the details and tips about the home loan.

Benefits of Home Loan:

It is a big step to buy a home. It leads to a huge sense of accomplishment, frustration, and anxiety. With the boom in the rates of the property, personal savings cannot fulfill the requirement of buying a house and that’s where the home loan plays a vital role.

Many times, Home Loan is considered a huge liability due to the enormous amount and lengthy tenure associated. Below are some benefits highlighted for availing the home loan:

• Feeling of Achievement: Purchasing a house is considered as the massive financial investment an individual makes in his lifetime and it is not just because of sentimental significance. The amount of money that we invest in our households is the largest share of our capital investments.
• Growth in Capital: Many of us have noticed the boom in property prices over the past few years. The possibility of appealing capital growth is the biggest reason for purchasing the house. The cost of construction itself consists of 80% of the total house cost which has consistently ascended at the rate of 20% in the past 10 years. House rents are also seen to rise with the inflation which makes owning the house one of the investments to beat the inflation trend in the coming years.
• Lower Rate of Interest: Nowadays it is seen that the home loan rate of interest is decreasing as compared to the last few years making it easy for the customers to avail themselves with the reduced EMI amounts making it more lucrative and reasonable.

The prime advantage of a home loan is that one can own a house within a day without waiting for the capital to be saved for investing in buying the house. Moreover, a person can repay the home loan depending upon the tenure chosen up to 30 years and the eligibility. The longer the tenure, the lesser is the EMI amount.

No Funds lock-in: The fact is buying a house does not come cheap, and it is advisable to go for a home loan even if you have the money to buy it. As the emergency can arise at any point in time and it discomforts if the big sum of money is bound in real estate. Though the house is a good investment, it is difficult to sell in an instance.

Follow this guide to get what you are looking for. It may lead you to go with private funding.