Home loan is nothing but an amount borrowed from a loan lender or a bank by those people who want to purchase a home. Definitely, building own home is among the first priorities of every person in the modern time. Even, many of the people bear the wish of building their own home as the biggest dream of their life. But it becomes impossible for most of the people to purchase their own house with the cash amount they have on hand at a time. With the perspective of helping those people, banks run a plan of lending them money for certain period at particular interest rate. The amount lent in this way is called as home loan.
In this case, the property bought by the borrower is kept under mortgage by the bank till the time the loan has been paid back with all the interest applicable on it.
Types of loans
There are various kinds of home loan out of which some leading are as follows –
Home loan – loan offered for purchasing or construction of a residential building
Home extension loan – loan which is suitable for extending the space or construction of home
Land purchase loan – This loan is provided to customers for investing on land
Balance transfer loan – the best loan for paying of existing home loan by enabling loan at lower interest
Amount of a home loan
The amount of home loan that can be borrowed depends upon many things. The amount which is financed basically depends upon as follows –
- Status of borrower
- Type of home loan
- Financial institute
- Current financial engagements of borrower
Generally up to 80 to 85 percent of the cost of property is offered to the borrower by a loan lender.
How the loan is repaid?
Repayment of home loan is carried out typically through monthly EMIs. It means, the total of the principle amount i.e. the amount bank offers as loan and interest amount i.e. the amount of interest rate is divided into equal EMIs. Certain number of EMIs are decided to be deposited to the loan lender for repayment of the loan within certain time period. The borrower requires paying back the EMIs regularly to the loan lender till all the EMIs are finished.
This is how the process of home loan goes on. Home loan is really a revolutionary term in the finance industry that helps people make their dream of own house true.