Each one of us at some point in time, feel like own a home. Having a home for ourselves would be the biggest asset and financial security that we could have. This is an asset that would stay with us for life long. And, it would get passed to our children over the years, thus the financial future is secured. With the property rates going high, most of us would be able to afford only a small amount of the full rate of the house. Hence, most people would go for a home loan. A home loan is an amount that you can borrow from a financial institution at an interest rate.
So, if you are looking for a home loan to own a home, you need to be aware of all the terms associated with it. When people get ready for a home loan, they should also be ready as to how much amount they need to pay as part of EMI. For this, you can make use of the home loan EMI calculator.
While you prepare for a home loan you need to be aware of the terms that are linked as part of a home loan.
- Home Purchase Loan – This home loan type is the most common one and helps you to purchase an apartment or a property. It could be either an under-construction or a construction that is already completed.
- Home Construction Loan – This loan type allows you to take a loan in case you already have a land and you require to construct a property on it.
- Home Improvement Loan –This home loan type mostly covers all the expenses that relate to renovation of a home like remodelling, painting, ceilings, etc.
- Land Purchase Loan – This is another type of home loan that can be availed to purchase land. This loan is mostly taken by people to build villas, bungalows, farmhouses, etc.
- Home Extension Loan – In case you choose to do some remodelling and include another room, then you can go in for this loan. This loan also allows you to include another floor to your existing home.
- Joint Home Loan – A joint home loan is taken when two people are named in a home loan. Your spouse and you could register as joint homeowners and get the tax benefits.
- Home Loan Balance Transfer –This home loan type permits you to adjustthe outstanding loan to another lender who provides better terms and conditions.
- EMI – EMI denotes Equated Monthly Instalments. A borrower who gets a loan amount would repay the amount in monthly instalments. The EMI contains the principal and the interest of the loan. You can make use of a home loan EMI calculator to calculate and have an idea of how much amount you need to pay.
- Tenure –Lenders provide home loan for some duration. Tenure denotes the years within which the loan must be paid off. You can pay your home loan interest and principal amounts in EMIs where the tenures last for a few years. In a few cases, home loans are provided for tenures 20-25 years.
- Interest – For a home loan, the term interest should be well understood. It refers to the amount any borrower should pay the lender over the principal loan amount. Borrowers can choose either a fixed interest rate or floating interest rate.
- Fixed Interest Rate – Fixed interest rate indicates that the borrower can repay the loan for the same interest rate all through the tenure of the loan.
- Floating Interest Rate – Floating Interest Rate indicates that as and when the interest rate fluctuates in the market, your amount would be revised.
- Disbursement – This denotes the process to release the loan amount to the borrower by the lender. The loan amount is given to the borrower only when the lender gets all the documents and the loan gets approved.
- Disbursement is for three types:
- Advance disbursement refers to the whole amount being dispersed before the project is over.
- Partial disbursement refers to the lender gives only a partial amount to the borrower.
- Full disbursement refers to the full amount of the loan all together.
- Pre-EMI – Once the loan is given to the borrower, EMI payment starts after the loan is disbursed. Till then, the borrower needs to pay the lender the interest rate that would on the partially disbursed amount.
- Post-dated Cheque – These refer to the cheques that you give that are dated ahead till the EMI date.The lender asks for one to three years of post-dated cheques.
Conclusion
There are a few of the terms that you need to be aware while you go for a home loan. Apart from these, there are many more terms that you need to be aware of.
