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Types Of Home Loans In India: A Complete Guide

Last Modified: 30 Jun 2023
Home Loan
Home Loan Guide
House Loan

Buying a home is one of the most significant financial decisions most people make. However, only some have the funds to purchase a home outright. This is where home loans come into the picture. In India, various types of home loans are available to suit different needs and budgets. This guide will explore the different types of home loans in India and help you make an informed decision. But first, let’s briefly understand a home loan and its uses.

Understanding a Home Loan

A home loan is a popular financing option provided by banks and institutions to purchase a home. It’s a secured loan with the property as collateral. Repayment is done in instalments with interest over time. Different types of home loans are available, impacting repayment terms and interest rates. Obtaining the right information helps make homeownership more accessible without upfront costs. Read more on the factors to consider for a home loan to make a more informed and confident decision.

Eligibility Criteria 

To be eligible for a home loan, applicants typically need to meet certain criteria. This includes having a stable income and employment, a good credit score, and providing necessary documentation like proof of identity, address, and income. The loan amount may depend on factors such as property value and the borrower’s down payment. Lenders also consider the borrower’s age, existing debts, and financial obligations. Eligibility requirements may vary among lenders, so it’s best to consult them directly for accurate information.  

Let’s delve into the various types of home loans available in India.

The 6 Types of Home Loans in India

Fixed-Rate Home Loans

A fixed-rate home loan is a type in which the housing interest rate remains constant throughout the tenure of the loan. This means that your EMI (equated monthly instalment) will remain the same even if the market interest rates can increase.

Fixed-rate home loans are ideal for those who want to plan their finances and avoid any surprises in their EMI amount. However, the interest rates on fixed-rate home loans are usually higher than the floating-rated ones.

Floating-Rate Home Loans

A floating-rate home loan is a type of mortgage and home loan in which the interest rate is linked to the market rates and can fluctuate during the tenure of the loan. This means that your EMI can increase or decrease depending on the market housing loan rates.

Floating-rate home loans are ideal for those comfortable with fluctuations in their EMI and want to take advantage of any decrease in the market rates. However, it is important to note that floating-rate home loans can be unpredictable and result in higher EMIs in case the market rates increase significantly.

Home Construction Loans

A home construction loan is a loan for building a new home. It’s disbursed in stages as construction progresses. It’s specifically for people who want to build rather than buy a ready-made house. These loans typically have higher interest rates and more documentation requirements than other home loans.

Home Improvement Loans

A home improvement loan is for renovating or repairing an existing home. It covers expenses like painting, plumbing, and electrical work. It’s a good option to avoid digging into personal savings. However, these loans typically have higher interest rates than other home loans.

Home Loan Balance Transfer

A home loan balance transfer is a type of loan that is used to transfer the outstanding balance of your existing home loan to another bank or financial institution. This is usually done to take advantage of lower housing loan rates offered by other banks.

A home loan balance transfer is ideal for those who want to reduce their EMI and save money on interest payments. However, it is important to note that additional charges may be involved in the balance transfer process.

Pradhan Mantri Awas Yojana (PMAY)

The Pradhan Mantri Awas Yojana (PMAY) is a government scheme that provides affordable housing options to the economically weaker sections of society. The Credit-Linked Subsidy Scheme (CLSS) under PMAY offers first-time homeowners the opportunity to secure home loans with reduced interest rates. By availing this scheme, you can potentially save up to Rs 2.67 lakh on your Home Loan. Additionally, you can enjoy benefits like an extended loan tenure of up to 20 years. To access these advantages, ensure that you choose a lender registered under the PMAY scheme if you’re a first-time property owner.

Complementary Loans for Home Financing

Apart from the types of home loans mentioned above, there are also some additional features that you can consider. For example, some home loan lenders offer a top-up loan, an additional loan you can avail on top of your existing home loan. This can be used for various purposes such as home renovation, education or medical expenses. 

Another feature you can consider is a loan against property (LAP), a type of loan secured against your property. This can be a good option if you require a large amount of money for a longer duration.


Various types of home loans are available in India to suit different needs and budgets. It is important to evaluate your financial situation and choose the right type that best fits your home loan requirements. Some factors to consider are the following:

  1. Interest rate
  2. Loan tenure
  3. Processing fee
  4. Pre-payment and foreclosure charge 
  5. Eligibility criteria

When selecting a home loan, it is also essential to read the fine print and understand the terms and conditions of the loan. It is also necessary to consider the various factors including interest rates, EMIs, etc. With the Home Loan Eligibility Calculator, you can gauge the EMIs to be paid during the loan tenure. Make sure you compare the different loan offers available in the market and choose the one that offers the best value for your money.

A home loan is a long-term financial commitment, and choosing the right type of loan that fits your requirements is important. Make sure you research, compare the different loan offers available, and read the fine print before making a decision. At Assetz Property, we believe in guiding you the right way when it comes to home loan finances. If you still have more queries, we have got your back with this all-you-need-to-know buying guide. With the right home loan, you can fulfil your dream of owning a home without straining your finances.

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