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Home Construction Loan - Interest Rates & Eligibility

Home Construction Loan - Interest Rates & Eligibility

Home construction loans are one of the many products that banks provide to meet the diverse demands of homebuyers and homeowners.

A home construction loan is a specific kind of mortgage that enables borrowers to get the money they need to finance the building of a residential property on a plot of land.

Furthermore, it varies from a home loan, which individuals take out to purchase an apartment or a flat. Even though the property you invested in is still under construction, home purchasers obtain a home loan from the bank rather than a construction loan; your builder must have acquired a construction loan to complete the project.

Eligibility Requirements for Home Construction Loans

The eligibility requirements established for normal home loans are somewhat similar to those for loans for home development. Followings are some of the primary qualifying requirements for loan applicants seeking loans for home construction:

  • Typically, lenders provide both residents and non-resident Indians with loans for the construction of homes (NRIs).
  • Banks and HFCs often approve loan applications for home development from borrowers who are at least 18 years old. Most banks and HFCs mandate that borrowers of home building loans finish paying back their debt by the time they turn 70.
  • Both paid employees and self-employed individuals can qualify for a home construction loan.
  • To increase their eligibility for home building loans, borrowers might choose a longer loan term or add earning family members as co- borrowers.
  • Applicants with credit scores of 750 or higher are more likely to receive approval for house construction loans.

    However, candidates with better credit ratings may be eligible for house loans from some banks and HFCs at cheaper interest rates.

Documents are Required for Home Construction Loan?

You might need to submit specific documentation depending on the bank from whom you are applying for the loan. The paperwork process for loans for new homes is generally the same as that for conventional home loans. Although not a complete list, the following documents must be submitted by the borrower with the loan application in order to be considered for a home construction loan.

Required Documents for Salaried Employees

ID Proof: Aadhar cards, passports, driving licences, telephone bills, ration cards, election cards, and any other certificates from statutory authorities can be used as proof of address.

Age Verification: PAN Card, Passport, or Other Statutory Authority Certificate.

Income Proof: The most recent six months' worth of bank statements, Form 16s from the previous two years, and the last three months' worth of pay stubs.

You may also read this: Personal loan guarantor

Documents Required for Self-Employed

ID Proof: Aadhar cards, passports, driving licences, telephone bills, ration cards, copy of GST registration, company registration license, and any other certificates from statutory authorities can be used as proof of address.

Age Verification: PAN Card, Passport, or Other Statutory Authority Certificate

Income proof: for businesses and ITRs includes documents attesting to their existence, their most recent three years of tax returns, their balance sheets with an accountant's certification, and their most recent 12-month bank statement.

Financial institutions also demand an authorised sanction plan from the authority for a loan for home building.

You may also read this: Salary advance loan

What are Rates of Interest for Construction Loans?

Lenders typically offer home construction loans with variable interest rates. The interest rate for loan applicants seeking loans for home building depends on a number of variables, including their credit score, monthly income, employment history, and loan amount. The interest rates offered for normal home loans and loans for home building are often the same.

For salaried borrowers, the starting monthly interest rate for a personal loan starts at 5% and fluctuates depending on the product standards. Depending on the risk profile of the customer, interest rates and processing costs change.

What are Construction Loan Benefits?

Home construction loan have a number of benefits, including:

Pay Interest Just: The majority of lenders will only ask you to pay interest on the amount you withdrew. Throughout the project's construction, they won't ask you for money. You can benefit much from this and only need to pay back the loan's principal after construction is complete. You simply need to pay interest up until that point.

Easy Approvals: Obtaining a home construction loan from a private lender is far simpler than doing so from a traditional bank. Therefore, rather than going to a large financial institution, many real estate developers prefer to seek a construction loan.

Flexible Terms: Hard money lenders can rapidly and efficiently customise construction loans to your project's needs. A hard money lender is a smaller operation and may work with you to ensure that draw schedules and interest payments are structured in a way that benefits both parties, in contrast to a bank, which frequently has loan terms and rules that are fixed in stone.

Offerings for Customized Loans: The proposal gets customised according to fit your spending limit, house loan qualification, and construction needs. With a sizable construction house loan sum and a customizable term of up to 30 years, jumpstart your home construction project. You may build your dream home in the most efficient manner at the lowest possible cost by doing this.

You may also read this: Mortgage Loans

How to Locate a Lender for Construction Loans?

To make sure you're getting the best deal for your circumstances, speak with a number of knowledgeable construction loan lenders to learn more about their individual policies and programmes. Rates, terms, and down payment requirements for construction loans should all be considered.

Finding a lender who specializes in construction lending and is experienced in the procedure is recommended because construction loans are more complicated than regular mortgage transactions.

Check out the lendingplate if you're having problems finding a lender who will work with you. They might be more liberal in their underwriting if you can show that you're a good risk or, at the very least, have a relationship they can suggest you to.

How to Apply for a Home Construction Loan?

You must: in order to be eligible for a loan for home construction.

Go to lendingplate’s personal loan page to apply for loan.
On the lending institution's application page, click the "Apply Now" button. You'll receive an OTP on the number you provide.

Choose whether you are a salaried employee or a self-employed candidate. Enter your mobile number and birthdate after that. To finish this phase. To check your offer, click the button.

You must provide your basic professional information and monthly income on the next page. Once you have completed the necessary steps, press "Enter Personal Details" to continue.

Enter information like your gender, marital status, PAN number, and personal email address on the following page.

Determine the loan amount and repayment period. submit the application at the end.

All you have to do is wait for a lending executive to call you after you complete the application to proceed.

You may also read this: Things to know before applying for a personal loan


One of the many products that companies pay to satisfy the various needs of homebuyers and homeowners are construction loans. Lenders are more likely to accept borrowers with credit ratings of 750 or above for construction loans. The borrower may opt for a longer loan term or include other wage earners in the family as co-borrowers. As evidence of address, you may utilise Aadhar cards, passports, driving licences, telephone bills, ration cards, election cards, and any other documents issued by statutory bodies.

The quantity of the loan, the applicant's credit score, their monthly income, and their employment history all affect the interest rates for borrowers looking for loans for home construction. The beginning monthly interest rate for a personal loan at lendingplate for salaried borrowers is 5% and varies depending on the product requirements.

You may also read this: All Banks Personal Loan Interest Rates in 2022

Once you finish the application and submit it, all you have to do is wait for a lending professional to call you. The loan can have a period of up to 30 years.

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