If you plan to buy your own house instead of purchasing a home, the experience will be wonderful. However, this would require you to apply for a home loan for self-construction, which has its own set of procedures.
If you have a piece of land and wish to construct your home, you will get the desired funds. For self-construction home loans, you can get the funds by applying for a house loan for construction. Buying a property still elides a plethora of people out there.
A home can be your perfect asset that never depreciates in value. But constructing your own home instead of purchasing directly is an exciting experience.
Furthermore, note that self-construction loans differ greatly from a general home loan. In other words, the application process is different when compared to home loans. Here are some important things to be aware of loans for self-construction.
Home Loans for Self-Construction- Important Things to know
A construction loan is a type of loan where you can apply for a loan for building your own home. As the construction work progresses, the lender pays the loan amount in instalments. In simple words, the lender should be aware of the construction process.
People applying for self-construction loans have to provide the lender with an illustrated construction timetable. You also have to provide a realistic budget to the lender before applying for a self-construction loan.
Note that the lender will inspect the construction site to monitor construction work. In usual scenarios, lenders may also ask third-party technicians to visit the construction site. The loan disbursement in self-construction loans happens only in instalments.
So never expect the lender to pay you a lump sum amount to help with the construction process. The approved loan will be disbursed between two to five instalments. As a borrower, you should ensure that there are enough funds to buy raw materials. Usually, people opting for a self-construction loan have to pay pre-EMI until the last disbursal of the loan amount.
Interior Works don’t come under Self-Construction Loans
Note that lenders provide house construction loan only for immovable works conducted for the purpose of house construction. This implies that interior works like furniture, painting and other decorations will not be funded.
Hence, ensure that you communicate your preferences to the lender. Being aware of all the terms and conditions of a self-construction loan is important to avoid last-minute surprises. Always remember that home construction involves a great deal of physical and mental work. Being aware of these intricacies will help you avoid disruptions.
Lenders will not pay for any Construction Plan Changes
Before approving the construction loan, the lenders would require you to submit several documents, including the plan. You also have to furnish the sales deed and NOC certificate from the local authorities.
But note that during the construction process, if you make any changes to the approved plan, the lender can freeze the loan amount. And if the construction plan changes are inevitable, you would have to seek additional approval. In this case, you should submit a construction estimate to the bank.
Types of House Construction Loans
Typically, there are three types of self-construction loans you should know.
- Self-Construction Loan
It is that type of loan when you will need funds to build a home.
- Renovation or Home Extension Loans
You can avail of home extension loans if you want to expand your existing property.
- Construction and Plot Loan
You can apply for this loan if you want to purchase a plot.
As the name suggests, a self-construction plan provides freedom to construct your house as you dreamt it. Usually, you don’t need to pay interest on the full amount from the first day. In other words, you have to pay interest on the amount disbursed to you.
With a home construction loan, you are free to expand your house when the need arises. However, you have to apply for a separate home renovation loan to execute the renovations. You should maintain a good credit score to ensure that the overall home loan application process is hassle-free.
Let’s hope you are now well aware of the various aspects of applying for a self-construction loan. Contact Hero Housing Finance today to apply for a self-construction loan to build your own home.
