4 Ways to Differentiate Between a Home Loan and a Home Construction Loan

One’s dream of having a home can be achieved in numerous ways. Some of the homebuyers may like moving into a readymade house, and some may like living in a home built exactly as per their preferences and family’s needs.

No matter which is your preferred way to have your home, funding options are not limited. Banks and other lenders offer finance for both types of housing purchases.

If you wish to apply for a loan for an under-construction property (or when you plan to build a home on a piece of land), then it will be known as home construction loans.

On the other hand, it will be called a home loan to purchase a fully built or constructed house.

A home loan and a home construction loan may appear similar, and many borrowers may be confused with these two funding modes. In the same context, we have created a post that will differentiate between home construction loans and a home loan.

The purposes of the loans

The purposes of both loans are different. One helps you buy a home; the other one assists in constructing a home as per your needs. If you want to move into a home fast, then you can avail of a home loan. On the other hand, people looking to build a home as per their designs and needs can go for home construction loans.

Lender’s groundwork checks

No matter what housing loan solutions you decide to opt for, both are approved after the loan creditor is done with the preliminary assessment. Availing the home construction loans includes the lender’s plot appraising, construction cost and value of the home. On the other hand, a home loan involves the home’s assessment that you wish to buy. A creditor will also check the value of the home, location, age, and growth prospects. All these factors will affect a lender’s final decision.

The eligibility and the documents required

The eligibility criteria of both these loans are the same, but you need to submit an extra document while availing home construction loans. It is nothing but a detailed construction plan including the construction materials to be used. It is vital for lenders as they can determine the exact cost of the project and provide you with funds accordingly. Construction loan interest rates are also on the lower side just like a home loan. It can help you pay smaller EMIs and managing other goals in life without stress.

The disbursal time

Once your documents are approved, a Bajaj Finserv home loan gets disbursed immediately. It could be up to some days or hours as per the processing time of your lender. On the other hand, the amount gets disbursed in parts when you apply for home construction loans. A lender may disburse a large portion of your total approved limit in the initial phase of the construction. The amount tends to get reduced as you move towards the completion of the construction.

Based on the discussed differences between a home loan and home construction loans, you can decide to choose between these funding solutions.

If you decide to opt for a home loan, then you can use an EMI calculator and a home loan eligibility calculator. These online tools will help you know the exact EMI amount that you will pay on the desired amount and the exact loan amount that you will get.

Read More:- The Home Loan Process
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