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Home » Residential Lending – From Types to Cost Involved, All You Need to Know!!

Residential Lending – From Types to Cost Involved, All You Need to Know!!

residential lending

Residential Lending: A residential loan is a secured loan that uses the property itself as security to be utilised to purchase a residential property. Residential loans offer long-term, low-interest capital with excellent value. They are paid back through EMIs. The borrower receives the property’s title back after repayment. The lender has the legal right to sell the subject property to recoup the outstanding loan balance if the borrower is unable to make loan payments.

A residential mortgage is a loan provided by a bank, mortgage business, or other financial institution for the acquisition of a home, whether it be the buyer’s primary dwelling, secondary residence, or investment home. In a residential mortgage, the borrower, the owner of the property, transfers the title to the lender with the understanding that, upon completion of the last loan payment and other requirements of the mortgage, the title will be returned to the borrower.

In a home loan, the principal amount as well as a fixed or adjustable interest rate are paid each month. A fixed-rate mortgage typically has an interest rate and periodic payments that remain constant throughout time. An adjustable-rate mortgage has a variable interest rate and periodic payments.

Types of Home Loans

Purchasing a home to live in: It is the most common kind of loan. You can obtain financing for the purchase of a home with this kind of loan. Following the completion of your transaction, you will be able to pay the lender in monthly instalments. If you match the requirements for the loan, the lender may approve a home loan for up to 80% to 90% of the cost of the property.

The interest rate, which varies from 9.50% to 11.50%, may be either fixed or variable.


Loans for Purchasing Land: Several banks provide land purchase loans. Buying land is a versatile alternative; the buyer can save money and build a house as soon as his resources allow, or keep the land as an investment. These loans are also known as Plot Loans.

Plot loans are a one-of-a-kind banking instrument designed to make the acquisition of a piece of land easier.

Home Construction Loans: This loan is provided to help customers to construct homes according to their choice. This financing is designed specifically for persons who would rather build their own home than buy one that has already been built. This form of loan has a separate approval process because it considers the plot cost as well. When applying for a house building loan, the most crucial requirement is that the plot must have been purchased within a year for the plot cost to be included in the loan amount. A preliminary estimate of the building cost is used to determine the loan amount. The funds may be disbursed completely at once or in instalments.

Conversion Home Loans: Home conversion loans are available to people who have already taken out a home loan and purchased a property with it but want to move to a different home. Borrowers can fund the purchase of a new property while avoiding repayment of the prior home loan by transferring the present loan to the new home. This type of home loan is not only convenient but is also quite costly. A conversion fee is taken to grant the loan.

Expansion Home Loans:A home extension loan is available to anyone who wants to make structural alterations to their existing home to expand their living space. In case you want a second balcony or a third bedroom? Some banks will facilitate providing you with the loans for the purpose.These loans can be used to finance up to 90% of the construction cost over up to 20 years.

Balance Transfer Home Loans:This option is available if a person wishes to transfer his or her house loan from one bank to another for reasons such as lower interest rates or better services provided by the other bank. This is done to repay the remaining loan at the other lender’s updated, lower interest rates.

What is the cost involved in Home Loan?

Following are some of the charges for home loans

· Principal

· Interest

· Mortgage Insurance

· Property Tax

Principal: The principal refers to the amount you borrowed and must return to your lender.

Interest: The major expense you pay to the lender for borrowing money to buy a house is interest.

Mortgage protection insurance: Mortgage protection insurance is a type of insurance that protects the purpose of mortgage insurance is to safeguard the lender if you default on your loan. The type of loan and the quantity of your down payment will determine whether you pay this or not.

Homeowners’ insurance and property taxes: Homeowners’ insurance is a type of property insurance that covers losses and damages to a person’s home, as well as their belongings and other assets. Liability coverage is included in homeowner’s insurance for accidents in the home or on the property. Your property tax and homeowners insurance payments are frequently rolled into your mortgage payment by lenders.

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