Many people want to build their own dream home, and it has become rather simple to do so in recent years due to the availability of multiple lenders in the market that offer home constructions at an affordable interest rate, long term tenors, sizeable sanctions, minimal documentation, and quick approvals.
While some people may choose to take out a home loan to buy a ready-to-move-in property, many people prefer to build their own home from scratch. A home construction loan, unlike a home loan, has a shorter term and the loan amount is disbursed based on the progress of your property's construction.
Here are eight factors to consider before applying for a home construction loan:
Credit Rating
Your CIBIL score is an important factor to consider because a lender will use it to determine whether you are creditworthy and financially capable of repaying the loan without falling behind on your monthly payments. A CIBIL score of 750 or higher is considered good.
Age
A lender prefers to approve home construction loans for applicants who are young and early in their careers because they can earn a consistent income and are less likely to default on their monthly payments. Applicants nearing retirement age can consider these tips apply for a home construction loan, but they may not receive favorable lending terms.
Employment Status
Both salaried and self-employed applicants can avail of a home construction loan, but they must meet the minimum work experience requirement.
Sizeable Sanction
Because the home loan is secured, you can receive a sizable loan sanction amount that will allow you to build your dream home without having to worry about the cost.
Documentation
When applying for a home construction loan, you will be required to submit a number of documents, including personal, financial, income, and property-related documents. These documents are important because they determine your eligibility for a home construction loan.
Tax Benefits
Apart from the lending benefits, you can also claim an additional home loan tax benefit, and if you meet the required tax eligibility criteria, you can save a significant amount of money in tax deductions.
Tenor Period
A home construction loan is an expensive financial obligation, and lenders understand that the borrower will need to repay the loan over a long period of time. A home construction loan allows you to obtain a long-term loan that will assist you in repaying your EMI in a comfortable manner.
Eligibility Criteria
When you apply for a home construction loan, you must meet a set of eligibility criteria. By meeting these criteria, you can receive favorable lending terms.
Also Read: Know About Tax Savings When Taking a Home Loan
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