Do you want to lease or buy a new property? If yes, the market has several options for finance. However, exploring such options give rise to practical questions. Like this one: What is the difference between a home loan and a land loan?
Believe us, even today, many consumers feel both these loans are similar. Such loans indeed have a marginal difference. Yet, such a difference can prove significantly vital for investors.
In this guide, we focus on the similarities and differences between home loans and land loans. Eventually, you will be able to make the right decision to buy your next property.
What Are Home Loans?
In simple words, a home loan is an amount of money you borrow from banks or financial institutions. This home loan definition applies to house loans too.
The purpose of this loan is to purchase a house or residence. Borrowers can select a suitable interest rate scheme. Generally, these interest rates are:
In addition, you can even get an exemption in the income tax after availing of a home loan. It’s vital to consult your accountant for better clarity regarding tax exemptions.
What Are Land Loans?
Now, land loans are different from home loans in one aspect. This type of loan allows a borrower to make money to purchase a plot of land.
This money is available from banks or other financial institutes. Land loans are of three basic types:
Land loans can be a flexible investment. Importantly, you can use the plot of land for residential purposes. Still, when you apply for a land loan, the procedure is a tad difficult than mortgages.
Home Loan vs Land Loan: The Similarities
You might be wondering why there’s a fuss about the home loan vs. land loan query. Even though the definitions seem straightforward, there are certain similarities.
The following points are nearly the same for both home and land loans:
- Application process
- Terms and conditions
- EMI options
The nature and type of applications for both loans are similar. However, the tenure of land loans is comparatively less than that of home loans.
Also, Read : 5 Common Myths On Home Loans
Difference Between Home Loan & Land Loan
Home loans and land loans differ in certain prospects. Let us understand these prospects in brief.
Eligibility Of Citizens
In India, residential citizens and NRIs (Non-residential Indians) can both apply for home loans. The application process has a marginal difference.
However, for land loans, NRIs aren’t eligible. In other words, only residential Indian citizens can apply for a land loan.
Eligibility Of Property
Almost all constructed and under-construction residences are eligible to pass the home loan criteria. Importantly, the home loans for residential spaces are flexible than land loans.
On the contrary, land loans are rigid. They cover specific types of land. The criteria for qualification of land for loans are:
- Residential plot
- Non-commercial plot
- Non-agricultural land
- Located within corporation limits
- Falling outside village and industrial area
Moreover, home loans apply to houses anywhere in the country.
Maximum Loan Amount
If you want to buy a new house, a home loan can supply 90% of the total property price value. So, you can buy a new residence with less in-hand money. Home loans can prove highly beneficial in such cases as they allow a greater cushion for initial investment.
If you want to buy a new land plot, there’s more need for initial investment. Land loans can theoretically cover 75% of the total property cost.
Land Loan vs Home Loan Interest Rate
Banks and financial institutes offer both loans on nearly similar interest rates. Still, you can expect land loans to cost an average of 0.75% more than home loans.
Also, the maximum tenure for land loans is 15 years. Home loan consumers can enjoy lenient repayment periods of up to 30 years.
Home Loan vs. Land Loan Comparison
We have segregated the comparison points as per sections to ease your research:
|Under corporation limits, away from villages and industrial area
|Under-construction or constructed home
|Plot to build a new home from scratch
|75 – 90%
|70 – 75 %
Now that you know the difference between a home loan and a land loan, it’s vital to contact the right people. Banks and real estate agents can help you get loans at the best rates. However, you need top real estate developers in India to simplify the overall property transaction. So, be sure you invest and explore the property market wisely.