There are a lot of credit products that help people manage expenses related to a housing property. Land loans, home construction loans, and home loans are different types of loans provided by financial institutions. While land loans and home loans are relatively popular amongst the masses, not many people are aware of the features of a Home Construction Loan.
Home construction loans are availed by individuals seeking financial support to construct a house on a vacant plot. Below, we are going to discuss some of the key features of a home construction loan
Quick Approval and Disbursal
If the borrower has a good credit score and is able to provide all the required documents, then the home construction loan can be approved instantly within a short span of time. Post-approval of the home construction loan, the borrower can avail the loan amount within 3-5 days.
Low-Interest Rates
The interest rates levied on home construction loans may vary from one financial institution to another. With leading financial institutions, it is possible to avail home construction loans at competitive interest rates. The interest rate usually depends on numerous factors such as the borrower’s credit history, the policy of the chosen financial institution, the prevailing market rate, etc.
Loan Amount
Construction of a house requires ample funds to meet the requirements adequately. By taking up a home construction loan, borrowers can avail a loan amount covering the total construction estimate of the house. However, this is subject to verification by chartered engineer/architect and audit by the technical officer, appointed by the lender.
Loan Tenure
The loan-term of a home construction loan can range from 1 year to as many as 30 years. The tenure of the loan depends upon the loan amount and the repayment ability of the borrower.
Flexible Eligibility Criteria and Minimal Documentation
- In most cases, lenders readily offer Home Loans for construction to salaried individuals, business owners as well as self-employed professionals. Borrowers can also check their loan eligibility online with the help of a home loan eligibility calculator.
- Minimal documentation is yet another advantage of availing a home construction loan with a leading financial institution.
Some of the major differences between a home loan and a home construction loan mentioned below
- The loan amount in case of a home construction loan is disbursed in phases. The lender keeps a check on the progress of the project and disburses the loan amount accordingly. However, in case of a standard home loan, the whole amount is disbursed at once.
- Most financial institutions do not levy a prepayment penalty in case of a home construction loan. Whereas, if borrowers prepay their standard home loan, they might have to bear the pre-payment charges levied by the lenders.
Now that you are well aware of all the key features of a home construction loan, you can consider availing it to build your own house. Do not forget to read the terms and conditions of the loan agreement carefully before signing it.