Plot Loan: A Smart Way to Finance Your Dream Home and House Renovation

Plot loan is a smart way to finance your dream home and house renovation. It offers several benefits, including lower interest rates, longer repayment tenure, tax benefits, flexibility, and customization.

A plot loan, also known as a house renovation loan, is a type of loan that allows individuals to finance the purchase of a plot of land or the renovation of an existing property. This loan is designed to help individuals who are looking to invest in real estate, either as a primary residence or as an investment property. In this blog post, we will explore the benefits, eligibility criteria, application process, interest rates, tax benefits, case studies, and tips for taking a plot loan.

Features of Plot Loan: 

  1. Land Loan Interest Rates: The rate of interest in case of a loan to acquire land and house loans are identical. However, some banks give a few basis points higher rates for loans for land acquisition than for residential loans. Banks grant a set term for building over the site. Therefore, the bank demands that borrowers submit a construction certificate. 
  2. Loan to Value Ratio: Loan to value or LTV denotes the amount of loan which a borrower would acquire against his property. LTV, in the case of financing for land acquisition with building, is much lower. Furthermore, the loan-to-value ratio (LTV) will be regulated at a maximum of 70% of the land value. In the case of house loans, LTV varies from 75% to 90%. 
  3. Lower Tenure: Land loans have generally a lower tenure of up to fifteen years, which isn’t the case with house loans, which are accompanied by a prolonged tenure of 30 years. Therefore, the EMI in the case of a loan for land acquisition is beyond that of conventional house loans. The term for a land loan also relies on the age of the borrower, repayment ability, etc. 
  4. Tax Benefits: Home loans qualify for a tax deduction on payment of the principal amount under Section 80C of the Income Tax Act as well as the interest component under Section 24(b) of the Income Tax Act. On the other side, tax incentives for land loans aren’t accessible. However, borrowers might claim a tax deduction on a loan if the residence is developed on land bought by the borrower.
  5. Prepayment Penalty: Floating rate loans sanctioned to individual borrowers are exempt from the prepayment penalty if a borrower intends to foreclose the loan. However, a land loan type of house loan might attract prepayment costs of two to 4% of the prepaid amount if the non-individual borrower has accepted it. 

Eligibility and Documentation

To be eligible for a plot loan, individuals must meet positive standards. Some of the important things eligibility standards consist of:

  1. Credit Score: Individuals should have an amazing credit score rating to be eligible for a plot mortgage. A credit rating of 750 or above is generally taken into consideration.
  2. Income: Individuals have to have solid earnings to be eligible for a plot loan. The lender will compare the character's earnings to decide their potential to repay the loan.
  3. Employment: Individuals ought to be employed to be eligible for a plot loan. The lender will examine the character's employment history to determine their stability.
  4. Property: Individuals ought to have a property to be eligible for a plot mortgage. The lender will evaluate the assets to decide their value and suitability for the mortgage.

Application Process for Plot Loan

The utility manner for a plot loan entails filling out an application form, submitting required documents, and presenting process verification and valuation. Here are the important thing steps concerned:

  1. Research: Individuals have to research distinct creditors and their loan offerings before making use of a plot mortgage.
  2. Pre-Approval: Individuals must practice for pre-acclaim for a plot loan. This will help them decide the amount of mortgage they could come up with the money for.
  3. Application: Individuals ought to fill out a utility form for the plot mortgage. The lender will evaluate the utility and decide the character's eligibility.
  4. Documentation: Individuals will want to provide documentation to the lender, including proof of identification, residence, age, income, employment, enterprise lifestyles (if relevant), and belongings.
  5. Verification: The lender will affirm the files supplied via the man or woman to ensure their authenticity and accuracy.
  6. Valuation: The lender will examine the assets to determine their value and suitability for the mortgage.
  7. Sanction: If the lender approves the mortgage software, the man or woman will acquire a mortgage offer.
  8. Disbursement: The loan amount is distributed in instalments based totally on the progress of the construction and protection work.

Conclusion

Plot loan is a smart way to finance your dream home and house renovation. It offers several benefits, including lower interest rates, longer repayment tenure, tax benefits, flexibility, and customization. By following the tips and precautions mentioned in this blog post, you can make an informed decision about taking a plot loan.


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