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Types of Home Loans


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Home Loan Types

Types of Home Loans

Land Loans - These loans are primarily for purchase of land to construct residential house.

Home Loans - These loans are issued for purchase of residential property, either one that is under construction, ready for occupation or self-construction.

Home Extension Loans - Such loans are used to extending the built-up area of existing residential property.

Home Improvement Loans - Ideal for those wanting to repair and refurbish their existing residential property. Home improvement loans can finance plumbing and electrical up gradation, painting, grills and woodwork.



Fixed Interest Rates Vs Floating Interest Rates

If you have been in a tizzy about fixed and floating interest rates, we take the mystery out of it. Fixed rates and floating rates are the interest rate options that are available for home loan shoppers. Fixed rates, as the name implies, involve an interest rate that remains fixed over the entire period of the loan.


The interest rate at the time of disbursement of the loan continues to be the interest rate throughout the life of the loan. In the case of floating interest rates, the prevailing interest rate as laid down by the RBI comes into effect. In a market scenario of dropping interest rates, this works out favorably to the consumer. The floating interest rates however are changed at regular intervals to reflect the market rate.


Repayment of Home Loans

Home loans are either calculated on annual reduction method or monthly reduction method or even daily reduction method. The daily reduction method works out best for the consumer. Look for lenders who have waived the pre-payment penalty. In this way, you can reduce your principal amount drastically by making lump sum payments whenever possible.


The application fees offered by competitive home loan finance companies and banks have been slashed to nearly 0.25% and in some cases they have been waived off. Repayment of home loans can be done by issuing post-dated cheques, auto debit facility from your bank account or deductions against salary. Different home loan companies have their own rules regarding prepayment of loan. Some companies have a limit on the number of prepayments. Some finance companies charge a fee for prepayment whereas others do not.


But repayment also must be carefully planned. In the current low interest scenario, tax benefits and effect of inflation bring down the effective interest paid on the home loan. A home loan is a better form of debt than any other and it makes money sense to keep it going as long as it offers advantages. Pre payment must be done at appropriate times for the appropriate amount.


Types of Home Loans
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