When one thinks of building a house or purchasing one, the thought can seem perfect until future homeowners realize what it might cost. Buying or building a home can be expensive, but many ways to make it more feasible. Land loans are one of the resources. So if you are thinking of buying a dream house for yourself, you may apply for land loans.
What Are These Land Loans?
Land loans are used to finance the purchase of the plot of land. Here land loans also work for purchasing a house or a piece of land, and even you can use it for business purposes. The land loans you want to take depend on where you buy the land and how you intend to use the land. Sometimes people confuse it with the construction loan. A construction loan is another type of loan. For example, if you buy land and start building, you have to take a construction loan. These construction loans are short-term loans, and they are very helpful for those home builders who want to get started on their projects right away. This can help the new builders who have everything planned and ready to go.
On the other hand, land loans are best for future builders who plan but don't want to jump into the building procedure. Land loans are the better choice if you are pushing your building project out a year.
How Are Land Loans Different From Home Loans?
When it comes to Indian investors, they are inclined to buy land or invest in building a house. If you are looking to buy the plot, you are eligible for the land loan but not for the home loan. Home loans are specifically for the already constructed property, under construction or likely to undergo construction soon. For the vacant plot, it is advised to go for the land loan. But the process and the terms are almost the same for both the loans then whether it is a home loan or land loan.
Requirements like banks' due diligence process, EMI options, documentation need for co-applicants, rate of interest are the same for both the loans home loan and land loans. Home loans are available for all types of properties irrespective of their types and location. You can't obtain funding for purchasing the agricultural land or buying a piece of land in a village. But if you have already purchased the land in the village and want to construct the house, you can go for the home loan. Coming on to the tax benefits, you can avail the tax deduction if you are constructing the house in the plot, but if you are with the land loan for the vacant plot, then you can't avail this tax benefit. A land loan is often treated as part of the home loan because it is treated as same as that of the home loan.
NRIs and land loans: In India, there are many non-resident Indians who are property buyers. If you are a non-resident Indian, you have to go for an extensive search before buying a plot through a land loan. Most banks don't give land loans to non-resident Indians, but they offer land loans at a higher interest rate if some offer.
How to Get a Land Loan?
Before knowing where you can get the land loans, it is essential to know about the EMI calculator. This helps understand the right amount of EMI that needs to be paid after taking a land loan. All you need to do is enter the loan amount, tenure in a month, the interest rate, and processing fee, and click on calculate. You will get the exact amount that you have to pay as EMI. Use an EMI calculator for all the calculations.
In India, banks offer land loans to the eligible person only. Land loans are provided to buy the vacant plot where you can construct your dream house. These land loans are provided at attractive rates. The best benefit is that you can repay the amount in affordable EMIs with maximum repayment tenure of up to 25 years. Now it's the time to know from where to get the land loans:
Key Features of Land Loan:
Eligibility Criteria for the Plot Loan:
Documents Required For The Land Loans: Here are some of the documents needed when you apply for the land loan. The documentation requirements are subject to change depending on the eligibility criteria, different for different lending institutions.
Some documents related to the land:
Can The Land Loan Be Converted To A Home Loan?
This is the most common question among people; land loans are generally provided to purchase the residential plot of land and when the borrower has the definite plan of building a house on the plot. Banks have the timeframe in which the construction work should be finished on the purchased land. Once the construction work is completed, then the occupancy certificate is to be submitted to the bank. After submission of the occupancy certificate bank can allow you to convert the land loan into a home loan. Having the home loan gives the borrower the tax benefits because land loans do not qualify for tax deductions.
How Does The Land Loan Work?
As there are different types of loans so, each has its qualification criteria for the borrowers. Some guidelines are taken into consideration when a borrower applies for a land loan. The credit score should be excellent when you apply for a land loan. You must give a valid reason for the use of the land. Once the borrower clears all the considered points, then the rates and the obligations of the land loan can be issued.
Land loans tend to be higher than mortgage interest rates because they are risky ones. But the borrower can qualify for the lower interest rates, which can happen when the borrower has an excellent credit score and debt-to-income ratio. Once the loan rate is determined and the borrower has been approved, the lender has the loan terms that the borrower has to go through. Now, a borrower can make the down payment and is eligible to pay the rest of the amount back with the decided interest rate.
There are some cons when it comes to land loans. It is crucial to understand the realities and the drawbacks of applying for land loans. Because of its riskier transaction, there is a lack of collateral, which is why the lender is less willing to lend loans to borrowers. When it comes to financing, there is also potential for higher down payments and higher interest rates. Pros are more as compared to cons of the land loans. So, one can quickly go for land loans for investments and also for the dream house. And the biggest benefit is building the own dream house; it can also be a business opportunity. So, it's all your vision for which side you want to go.
If you would like to buy a house, then before that, be sure about the benefits and drawbacks of a land loan. This makes you sure about the right way to deal with it. To make the thought of building a dream house sounds perfect, it is essential to be aware of the realities of taking land loans. The land is a good investment that grows in value over the long term. With this land loans resource, now you can have your investments as higher as possible.