Nowadays, there are loans available for just about anything. You want to buy a gadget, Yes! We have a loan. Need a break from work? Have plans for a vacation? We have a loan for that. And of course, the evergreen, want to buy or build a home. We have a loan for that as well!
When an individual decides to become a homeowner, the first dilemma that they are faced with is whether to buy a developed property or to buy land on which they can build a home for themselves. Then comes the process of applying for loans. You need to understand which loan sets you off on the right foot. There are land loans, and then there are home loans, both offered to turn you into a homeowner, but which one to choose. The confusion probably arises from calling both a house and land as – Property. Let us show you the basic differences between them.
The first and foremost difference is right in their name.
Home Loan:
A loan that is availed to buy a residence that has already been built or is being built.
Land Loan:
A loan that is availed to buy land solely for the purpose of building a house or residence on it.
One cannot avail a home loan to buy land to build on, nor avail a land loan to buy a constructed property.
The difference in Tenure:
The tenure is the duration of time over which the loan is repaid to the lender, in most cases a bank. Home loans have considerably longer tenure compared to land loans. A home loan can even exceed 30 years in certain cases like say buying luxury apartments for sale in Chennai. On the other hand land loans rarely exceed a tenure of 15 years.
The difference in Tax deductions:
When taking a home loan the individual can avail tax deductions on both the interest and the principal amount they pay that year. But there are no apparent tax deductions in taking a land loan. You can only avail of tax deductions on the loan that is taken towards constructing a house on the land. So the benefits set in only after construction begins.
The difference in Loan to Value:
When applying for a home loan the lender or the bank assess the value of the property. Then the approved loan amount is decided on a certain percentage of that property value. In India, the eligible loan amount can be anywhere from 75% to 90% of the property value. Say there are apartments for sale in Chennai valued at 1Crore Rupees, you can get a home loan of 75 Lakhs to 90 Lakhs Rupees.
When applying for land loans or plot loans as they are otherwise called, the maximum eligible loan amount is set at 80% of the property value. A minimum of 20% of funds needs to be made ready from your end.
People still do get confused about home loans and land loans, but we hope this article gave you some clarity. It is always wise to read the terms and conditions carefully and consider all possible options before availing of a loan. If you are looking for apartments in TNagar or new apartments in Porur, check out the exclusive projects at Lifestyle Housing. We have excellent apartments for sale in Chennai that have plenty of advantages and amenities over other properties. We are partnered with reputed national banks, and our experts will guide you through the loan process professionally.
