Home Loan · Guide
What is a home loan?
A home loan is a long-tenure, secured loan you take to purchase a residential property. The property itself is the collateral, which is why home loans carry the lowest interest rates among retail loans in India.
By FinancePaisa Editorial Team · Research & editorialUpdated · 1 min read
On this page (4 sections)
How it works
You agree on the property value with the seller, pay a down-payment of 10-25%, and the bank funds the balance. The bank creates a mortgage in its favour, releases the money to the seller, and you start paying EMIs the next month.
Types of home loans in India
- Home purchase loan (most common)
- Home construction loan (funds released in stages)
- Home extension or renovation loan
- Plot purchase loan (with construction commitment)
- Balance transfer (moving loan to a lower-rate bank)
- Top-up loan (extra funds over existing home loan)
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Key numbers to know
| Term | Meaning |
|---|---|
| Loan-to-value (LTV) | Percentage of property value the bank funds |
| EMI | Equated monthly instalment covering interest + principal |
| MCLR / EBLR | Benchmark rate to which floating loans are linked |
| Foreclosure | Fully repaying the loan before tenure ends |
Loan-to-value (LTV)
- Meaning
- Percentage of property value the bank funds
EMI
- Meaning
- Equated monthly instalment covering interest + principal
MCLR / EBLR
- Meaning
- Benchmark rate to which floating loans are linked
Foreclosure
- Meaning
- Fully repaying the loan before tenure ends