There are many ways to achieve the home of your dreams. Some people prefer to have a pre-built house, while others prefer to see their home built as they intended. You can spend your time and energy building the home of your dreams or skip the hassles associated with home construction. There are many financing options available. Both types of home buying can be made possible by bank loans.
More Read: Alternatives To Construction Loans
A ‘home construction loan‘ is a loan that you can apply for to purchase an under-construction property. A loan to buy a fully-constructed house is called.
Home Construction Loan.
Home loans and construction loans look similar, and many borrowers need clarification on these credit products. Although both products are for home buying, some key differences exist. These are the key differences between a loan for a home and a loan for home construction.
Home Construction Loans Disbursed in Phrase
A home loan for an under-construction property loan is available after some time. As the project progresses, the loan amount will increase. The total loan amount is into phases. The lender monitors the progress of your project closely and will only disburse a phase if the previous phase has the time allowed.
There are Different Tax Exemption Conditions
A home loan and an under-construction home loan can be eligible for tax benefits, but the process of claiming them differs. The tax benefit for an under-construction home loan can only be if it is within five years or if the house has been within five years. The tax return must be in five equal parts. These conditions won’t apply if you get a general loan for your home.
Larger down payment
The available down payment for a home loan is between 10% and 20% of the property’s value. Home loans can pay the rest. To be eligible for a home loan, you must put down more than 25% of your property’s value.
There will always be a difference between the interest rates on home loans and home construction loans. Home loans generally have an interest rate between 8.55 and 12 percent. A home construction loan is more expensive than a regular loan. A home construction loan’s interest rate is between 11-14 percent. The lender and the property where will determine the interest rate.
Zero Cost In Prepayment
Many lenders offer home construction loans with zero prepayment fees, even for early tenures. If you wish to pre-pay your home loan early, i.e., You will be required to pre-pay the penalty before you complete the first 18 months.
For builders working on large projects, construction loans are essential. Individuals who wish to build their homes in their style can apply for a loan. As mentioned, obtaining a home construction loan can take time as you must produce a proof plan and complete the work within the time frame. Will ensure that disbursals are on time. You must have a realistic architectural plan and a sufficient amount to repay the loan.
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