There are many ways to get land or property, such as using home loans and land loans. People take out home loans to buy a house. You can construct it now, continue, or build it in the future.
In this blog post, we’ll understand the difference between a home loan and a land loan (Loan Against Property)
Define a home loan.
A home loan is a financial product designed for buying a home. This loan can make buying a home easier, such as a flat, a house under construction, or land to build on. But it's still necessary to learn more about it.
Land Loan
So, a land loan is also called a loan against property (LAP). It's meant to finance buying land where one intends to put up their home or for investment. Yet, not all banks provide loans for buying plots. The terms for these loans differ from those for housing loans.
Here are some key differences between Land Loans (Loans Against Property) and home loans.
Interest Rate:
Lenders usually charge higher interest rates on loan loans than on home loans. They do this because they consider LAPs riskier. Both the government and RBI have focused on affordable housing. They have done so through various schemes. The schemes aim to reduce home loan rates.
Usage:
Laps are more flexible. You can use them for purposes such as expanding businesses or funding education. Normal housing loans are only for buying houses, plots, and construction. They can't fund these other purposes.
Loan to Percentage Value:
LAP gives out about 60% of property values as loans. This figure is 90%. It's for advances against mortgages. They're taken as collateral for housing finance company loans.
Tenure:
Home-buy credit facilities provide long repayment periods, up to 30 years. But, mortgage-backed personal loans usually expect repayment within 15 years.
Top-Up Option:
Besides regular funds, top-up features abound. Borrowing base advances make them even more attractive than conventional mortgages do. These mortgages don't offer such benefits.
Tax Exemption:
Interest on home loans is tax deductible under section 24 of the Income Tax Act. Yet, only repaying the principal gets a rebate. This is under section 80C of the Long-Term Capital Gains Act. No such benefits are available for loans against property, except in rare cases.
Final Words!
Knowing the difference between home and land loans is vital in making good financial choices. This knowledge can affect your financial planning and career path. It matters whether you are a borrower or want to become a home loan agent. To join as a home loan DSA partner with Ruloans, take the first step to register as a DSA Partner by signing up with us today. Get more details on the Ruconnect app or by visiting our website.
You will be able to steer through the loan market well. You can choose what's best for you by having this information at your fingertips.
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