Home Loan for Purchase of Plot
What is a Land Loan?
Many of us don’t know that land loans are available in the market and only know about home and associated loans. However, most of the financial institutions to provide loan on land purchase as well.
The underwriting and procedure for a home loan and land loan are very same, so you may not be able to differentiate between the two however there is different in the cost of the loan when it comes to land loans.
Land loans are different than home loans
Purchasing a plot is treated differently than purchasing a home when you consider taking a loan. Home loans are usually just for buying or construction or renovations of the home.
When you buy a plot you need to apply for land loans which have different treatment and norms. Land loans are usually at a bit higher rates and in contrast to a home loan where your LTV could go up to 90%, in case of land loans you could only get financed up to 70% of your plot value.
Also, you can get land loans only when you buy a residential plot, not in case of any other kind of land. One could not borrow a loan to buy agricultural land.
Also, land loans do not come with tax benefits like home loans unless you are constructing a house on that plot. Also, the norms for such loans are different from different banks.
Somewhere you need to start the construction within 2 years of disbursement of loan amount and at other places, you need to complete the construction within 2 years of disbursement of the loan amount.
Land loan tenures are also shorter than home loans. Where home loans come with a tenure of up to 30 years, land loans are just meant for 15 years. Also, some banks have an upper limit to the amount of land loan you could take.
Land loans also depend on the location of your land as they tend to be much riskier than home loans for the lender as they are much harder to sell in case the borrower stops making payments.
Hence then lenders ask too much more down payments on land loans. Also, this kind of loan is more available from private financial institutions in place of nationalized banks. Nationalized banks will be much more cautious in evaluating the price of land before disbursing the land loans.
Quick look at difference
Some of the features of land loan are
They are still cheaper than most of the loans available in markets like credit cards and personal loans. They have interest rates ranging from 9.35% up to 9.65% which vary depending on your income and gender.
They also have a low processing fee with most banks providing step down interest options, i.e. your interest amount reduces as your principal amount reduces over years of payment.
Eligibility for land loans
One must be an Indian resident, with a minimum age of 18 years and maximum age of 65 years. The loan tenures are usually 10 years and go up to 15 years depending on the bank disbursing this loan for you.
There is also an upper cap on land loans which varies from bank to bank. Like Indian bank has an upper cap of 1 crore rupees whereas Punjab bank has an upper cap of 50 lakh rupees.
List of Documents required
- You must provide your income proofs with your employer card.
- Complete loan application form with three passport size photograph of the applier.
- Proof of Identity like Voters ID card/ Passport/ Driving license/ IT PAN card
- Proof of residence like Telephone Bills/ Electricity Bill/Property tax receipt/ Passport/ Voters ID card
How to get a land loan?
A land loan is a loan that is taken to purchase land for constructing a house or just for investment. One will only get a land loan if the land fits under the municipality limits. Moreover, the land loan is not given for purchasing land in the agricultural area.
To get a loan, one has to submit an identity card, address proof, income proof, possession certificate, encumbrance certificate, location certificate and other related documents.
FAQs about Land Loan
One can apply for a land loan online or by visiting the bank. Moreover, Loansxpert can guide you in the process of applying for the land loan.
If you are purchasing the land in Urban areas then you can get up to 70% of the loan amount from the bank. However, if you are purchasing land in towns or smaller cities then you will get 50% to 60% of the loan amount. The remaining amount has to be paid by you.
Generally, it will take 1 week for the land loan to get approved.
Most of the banks will charge 0.35% as a processing fee. It can be from minimum of Rs. 2000 to a maximum of Rs. 10,000.
Are planning to buy a piece of land using the land loan? here is our guide for the same go through this simplest guide or just contact us, our experts get will in touch with you within few hours time.