How to Apply for Home Construction Loan

How to Apply for Home Construction Loan

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Home construction is a loan taken against the mortgage of the property or the piece of land on which you plan to expand or construct the house. For instance, if you want to build an additional floor on your house, you can avail a home construction loan.

Features of a home construction loan: These are features and benefits of a home construction loan.

  • Tenure: You can avail a home construction loan for tenure ranging between 5 to 30 years. As it is a long-term commitment; thus, the burden of paying EMI every month is more. 
  • Loan Amount: Borrowers can get upto 90% of the value of the property depending on income eligibility and repayment capacity. It ] can range from₹200,000 to ₹150,000,000. 
  • Tax benefit: You can get tax deductions on home construction loan under Sec 80 C and Sec 24B. These tax benefits are available up to Rs. 2 Lakhs on the interest paid and Rs. 1.5 Lakhs on the principal amount. Additionally, you can get tax deductions upto Rs 50,000 under Sec EE if you are a first-time buyer.
  • Balance Transfer facility:  On a home construction loan borrowers can get the facility of balance transfer if they find that the current rates of home construction loan are higher. Further, you can also avail the top-up facility on a home construction loan based on your past repayment record and relationship with the banks.

How can you avail home construction loan: Before applying for a home construction loan, it is crucial to check your eligibility for a loan. Here are some eligibility criteria for getting a home construction loan.

Eligibility criteria to get a home construction loan: You must have a detailed plan about home construction, i.e. the materials to be used, who will construct a house, etc.

  • Age:  Borrowers between the age of 18 years to 70 years can avail a home construction loan. However, you must check eligibility criteria of specific banks as some banks may provide home construction loans upto a maximum age of 65 years.
  • Profession: A home construction loan can be availed by both self-employed and salaried individuals. However, generally, the interest rates are lower for salaried applicants.
  • Credit Score: A credit score of 650 can help you to get a home construction loan at some banks. However, if you have a credit score of 750 or above, then it is considered an ideal score for availing a construction loan. 
  • Income:  To avail a home construction loan, you should have a minimum income of Rs. 25,000. Also, your fixed income to obligation ratio cannot exceed 65% of the monthly income. 

Process to avail a home construction loan: A home construction loan can be availed from major  Banks such as SBI, Axis Bank, PNB and Citibank. After checking the eligibility for a home construction loan, you can compare various institutions based on the interest rates, processing fees, lending process and documents required for availing the loan.

You can apply for a home construction loan by visiting the bank at the nearest branch, or you could apply online for the loan at the respective bank’s website. If you want to get the best rates on a home construction loan, you can apply for the loan on an online marketplace like BankBazaar, Myloancare etc.

These are some of the documents that you would require to get a home construction loan.

  • Identity proof: Aadhaar Card, Valid Passport, Voter ID Card, Valid Driving License and PAN Card.
  • Address proof: Utility bills, Aadhaar Card, Valid Passport, Voter ID Card.
  • Income proof: Income Tax Returns, latest Form 16, Salary account statements for the last 6 months, Salary slips for the previous 3 months, Income tax returns, salary accounts of the last 6 months and salary slips for the 3 months of the business entity
  • Documents related to property: Encumbrance property, title deeds of the property, plan sanctioned by local authorities and estimated construction cost quotation.

Summary: How to Apply for Home Construction Loan

Home construction is a loan taken against the mortgage of the property or the piece of land on which you plan to expand or construct the house. For instance, if you want to build an additional floor on your house, you can avail a home construction loan.

You can avail a home construction loan for tenure ranging between 5 to 30 years. Borrowers can get upto 90% of the value of the property depending on income eligibility and repayment capacity. It can range from₹200,000 to ₹150,000,000. 

Read more: Tips to Consider in Getting a Loan

A home construction loan can be availed from major  Banks such as SBI, Axis Bank, PNB and Citibank. After checking the eligibility for a home construction loan, you can compare various institutions based on the interest rates, processing fees, lending process and documents required for availing the loan.

You can apply for a home construction loan by visiting the bank at the nearest branch, or you could apply online for the loan at the respective bank’s website. If you want to get the best rates on a home construction loan, you can apply for the loan on an online marketplace like BankBazaar, Myloancare etc.

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