Mr Timmons works as a CNC operator in a factory. He saved every month from his salary over the years. After he gathered a sufficient amount, he purchased a plot.
However, Mr Timmons has exhausted all his savings in buying the vacant piece of land and has nothing left to construct a house. How will he make his dream house without any savings?
In the above case, Mr Timmons should apply for a house construction loan with a bank. Since Mr Timmons has a stable job, he might be eligible for a higher construction loan from the bank.
Read on to understand the concept of house construction loans and their benefits.
Understanding the Concept of House Construction Loans
A home construction loan is a secured loan offered for building a house. With a construction loan, a home is built on a vacant piece of land. Since the plot will act as collateral, construction loans are secured.
People can expect lower interest rates for construction loans as they are secured. Loan providers apply higher interest rates to unsecured loans because they are risky.
A house construction loan can be utilised for house mapping, construction materials, labour charges, and other reasons. One can entirely fund the construction of their dream house with a secured loan.
Characteristics of A Construction Loan
Characteristics of a construction loan in India are as follows:
Long Repayment Tenure
Like many other secured loans, construction loans offer a longer repayment tenure. The loan applicant can choose the repayment tenure according to their financial position. A loan applicant can choose a shorter repayment tenure, but the EMIs will be bigger.
Construction loans allow applicants to choose a repayment tenure of up to 25 years. A longer repayment tenure will decrease the EMI size but increase the total interest charge.
Associated Tax Benefits
Individuals can avail of tax benefits after taking a house construction loan. As per the Income Tax Act, benefits are available on a house construction loan repayment.
One can get a tax benefit of up to INR 3.5 lakhs on house loan repayment.
You can get a home construction loan in India without hassle. The construction loan will be instantly approved if all the submitted documents are original and the applicant meets the loan criteria.
You do not have to wait indefinitely to begin the construction of your dream house.
Allows Balance Transfer
One of the noticeable features of a construction loan is the balance transfer facility. A refinancing facility is available on construction loans to opt for better offers.
For example, let us say you have taken a construction loan but stumbled upon another bank that offers a lower interest rate. In such a case, you can refinance the construction loan with the new bank and enjoy lower interest rates.
Why Should I Apply for A Construction Loan in 2022?
The pros of house construction loans in India are as follows:
- Buying a readymade house can get costly at times. It is because the builder might add commission and other hidden charges. To escape the commission charge, one can construct the house independently. A house construction loan will decrease the overall cost.
- Home loan eligibility is not too complex. Individuals with stable jobs and good credit scores will quickly get a construction loan. The loan provider will cross-check the applicant’s repayment capacity before approving a construction loan.
- You do not have to return the construction loan amount to the bank at once. You can choose an appropriate repayment tenure and return the construction loan amount via affordable EMIs.
- Individuals will be eligible for tax benefits after taking a house construction loan in India.
Besides the features discussed in the article, a home construction loan also allows applicants to get their hands on a lump sum amount. Flexible repayment options and financial assistance from the loan provider are some other features of construction loans in India.
So get a home construction loan today to solve the issue of finances and begin building your dream home!