Do you prefer to rent or purchase new real estate? If so, the market offers a variety of financing solutions. But investigating such possibilities raises relevant issues. Similar to this: What distinguishes a mortgage from a loan for land?
Trust us, many individuals still believe that both of these loans are comparable today. There is a small variation with these loans. However, investors may find that distinction to be extremely important.
We emphasise the similarities and contrasts between home loans and land loans in this guide. You will eventually be able to select your next property with confidence.
What is a Home Loan ?
A home loan is essentially a sum of money that you borrow from banks or other financial entities. Additionally, mortgage loans fall under this definition of a home loan.
Purchase of a home or other habitation is the goal of this loan. Borrowers are allowed to choose an appropriate interest rate plan. These interest rates are typically as follows:
Furthermore, after obtaining a home loan, you may be eligible for an income tax exemption. To get further clarification on tax exemptions, it's critical to speak with your accountant.
What is a Land Loan ?
Presently, there is one way in which land loans differ from mortgage loans. An individual who takes out this kind of loan is able to earn money in order to buy a piece of land.
Banks and other lending institutions have this money on hand. There are three fundamental forms of land loans:
Lending against land may be a flexible investment. A crucial aspect is that the land can be used for residential purposes. However, the process is a little more challenging when applying for a land loan than it is for mortgages.
Similarities Between Home Loan and Land Loan
Frequently, the following characteristics of the two loan kinds are similar:
The land you are purchasing serves as security for the land loan, granting the lender the right to foreclose on the property if you do not make payments.
A land loan can be prequalified for.
In the application procedure, you must go through the same steps, like a credit check.
Similar to when considering a mortgage for a home, the lender will examine the property. Getting a survey and appraisal are included in this.
Rates of interest for land loans may be fixed or recalculable.
Similar steps are taken during both loan closing processes.
Difference between Home Loan and Land Loan
Home loans and land loans have different potential outcomes. Let's take a quick look at these possibilities.
Eligibility of Citizens
Both Indian residents who live in their country of residence and NRIs (Non-Resident Indians) are eligible to qualify for home loans. A small distinction exists in the application procedure.
NRIs are not, however, qualified for land loans. In other words, a land loan can only be applied for by Indian people who live in their country.
Eligibility of Property
Most houses that are built or are being built are suitable to meet the requirements for a mortgage. In contrast to land loans, residential housing loans are important since they are more flexible.
Land loans, however, have strict requirements. They cover particular sorts of terrain. The following factors determine whether land is eligible for loans:
Land not used for farming
Within the boundaries of a company
Occurring outside of a settlement and an industrial area
Homes anywhere in the nation are eligible for home loans, too.
Maximum Loan Amount
90% of the entire cost of the property might be covered by a home loan if you wish to purchase a new home. Consequently, you need less cash on hand to purchase a new home. Home loans can be very helpful in these situations because they provide a bigger initial investment cushion.
A larger initial payment is required if you wish to purchase a new land piece. Theoretically, land loans might pay for 75% of the cost of the entire property.
Both loans are provided by banks and financial institutions at rates of interest that are remarkably similar. Nevertheless, you should budget an extra 0.75% on average for land loans compared to mortgages.
Furthermore, 15 years is the maximum term allowed for land loans. Customers who borrow money for a home can benefit from forgiving payback terms of up to 30 years.
Comparison of Home Loan and Land Loan
Now that you are aware of the distinction between a land loan and a home loan, it is critical to make the appropriate contacts. You can find the best rates on loans with the aid of banks and real estate brokers. For the complete property transaction to be simplified, you need the best real estate developers in India. Be careful with your investments and market research, then.