Home loan is a generic term used for long-term loans that are availed for purchasing a property—a house, land, apartment, extension of the house, etc. However, depending on the exact need for which the loan is required, the customer can avail of a loan that fulfills that particular need. Here are the different categories:


Home construction loan

As the name suggests, the loan can be taken by someone who wants to build a house. This can include the cost of the plot as well as the cost for constructing the house. The cost of the plot is only included if the loan is taken within one year of purchasing it.

Home purchase loan

To purchase a new or used fl at or bungalow, one needs to apply for a home purchase loan. In case of new property, banks fund up to 90% of the cost of the house for a repayment period of up to 30 years.

Home extension loan

If a home owner, at a later date, wishes to extend the usable space of the existing house, they can take a home extension loan. This usually involves structural changes to the house to create more space.

Home improvement loan

If an existing house requires repairs, painting or renovation, the owner can avail of a home improvement loan. Some banks consider extension and improvement under a single category of home loan.

Bridge loan

This loan is granted for the period till the owner sells the existing property after they have purchased a new property. The loan helps to bridge the funding gap that may arise for the time taken for sale of the existing property. A bridge loan is typically a short-term loan that is granted for up to two years.

Points to note

• Age, income and credit score are the three major factors that affect sanctioning of home loans.
• An existing home loan can also be enhanced through a top-up loan to fund additional work.

Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.