3 Types of Lesser Known Home Loans

There was a time in the banking industry when Home Loans were unheard of. Today, there are Home Loans products that many people might not even believe exist. Property rates are spiralling upwards. Maybe, the easy availability of Home Loans is the reason for the same. Or is it vice versa? It is challenging to answer the question. However, the fact is that many people find it difficult to buy their dream home because of lower eligibility norms. The unique Home Loan variants come in to resolve the issue under such circumstances.

Here are three Types of Home Loans Offers many people are not aware of:

a) Step-up Home loan

Today, the average age of the Home Loan borrower has reduced to below 35 years. There is scope for further reduction with more number of younger people going in for Home Loans. However, they have a genuine issue to face. Their income levels in the initial years of their employment are less. Hence, they are not eligible for a higher loan amount as banks have tight stipulations in this regard. The youngsters argue that their salary levels will increase over the repayment tenure of the loan whereas the banks account for the present-day income while processing the loans. These borrowers have a point here.

The present generation banks understand the problem and have come up with a novel solution in the form of a Step-Up Home Loan. This loan facility allows the borrower to borrow more than the normal eligibility level. However, the EMI (Equated Monthly Instalment) will be lower in the earlier years. As the income levels increase over the years, the EMI will also increase proportionately. At present, one specific bank, i.e., ICICI Bank Ltd has such an innovative Home Loan product. The highlight of this loan product is that the interest rates are same as that of the standard Home Loans.

b) Home Loan with Overdraft Facility

A Home Loan is a long-term investment with many banks sanctioning Home Loan tenures extending up to 30 years. Usually, you will aim to clear off the Home Loan earlier than the schedule and reduce your loan liability. You have the option of making prepayments whenever you have surplus funds at your disposal. But, the amount you deposit into the standard Home Loan account gets adjusted against the principal balance. You do not have the facility to withdraw the amount in case of an emergency.

Specific banks have come up with a viable solution where they offer you a Home Loan with an overdraft facility. This facility links your savings or current account with your Home Loan. You can deposit your additional funds in this overdraft account and avail the benefit of reduction in the interest component. If you need the funds in an emergency, you can withdraw the additional amount so deposited into the account and use it for meeting your requirements. The banks adjust the Home Loan and interest balance accordingly. This facility is handy for business people who might receive windfall gains or may have seasonal income. It allows them the liberty to withdraw the money whenever they need it. However, you should note that such additional repayments into the Home Loan overdraft accounts do not give you benefits under Sec 80C of the Income Tax Act 1961 for obvious reasons.

c) Home Loans for Pensioners

Does this sound like a surprise? It should because pensioners are usually over the age of 60 years. If you go through the standard Home Loan eligibility criteria, you find that people between the age of 25 and 55 years are eligible for getting Home Loans. The Home Loan for pensioners is a unique concept where the pensioner receives a Home Loan with the repayment period extending up to the age of 76 years. The repayment of such a Home Loan is by way of direct debit from the pension account of the borrower.

A vital point to note is that the loan amount is not a substantial one. The pension can club the loan amount with the surplus savings accumulated over the years and buy the dream home of their choice. However, one should be cautious while opting for such a Home Loan. It is because the needs of a pensioner are more than that of an average serving person. The pensioner might require money for medical emergencies. Therefore, it is better to assess your needs and ensure that the EMI does not affect your regular expenses.  We have seen three unique variants of the Home Loan. Therefore, when you apply for a Home Loan online, it is advisable to be aware of these variants and plan your dream home accordingly.