types of loans - artech realtors

When purchasing a property, whether land or home, it is traditional to avail of a loan to tide over the huge cost. While most people prefer to buy a hassle-free, ready-to-move-in or under-construction apartment or villa home, there are others who prefer to invest in plots of residential land and build their home at their own convenience.

Both will involve application for a bank loan; for this, you will need to ensure your credit score looks good and is above 750 points at least. And this is where the similarities between the home loans and land loans end. Here’s a look at the differences between the two loans:

Tenure

The tenure for home loans can go up to 30 years, depending on the loaner bank. Applicants of land loans on the other hand, can only get a maximum tenure of 15 years.

Purpose of Loan

Home loans can be used to build a home or to buy a ready-to-move-in or under-construction home from an approved builder. Land loans on the other hand can only be used for buying land, which will only be used for building a residence. Land loans cannot be used to buy agricultural land. Furthermore, the purchased plot shouldn’t be located in an industrial or village area.

Tax Benefits

One of the best benefits of a home loan is that you can avail of tax deductions on the interest paid out on the monthly EMIs as well as the principal repayment. And if the home loan has been taken jointly by both husband and spouse having separate incomes, then they can both avail of income tax benefits on the same home loan; this would be on both the principal amount as well as the interest paid out. When it comes to land loans however, there are absolutely no income tax benefits. Eligibility for tax benefits is only possible when you take another loan to construct your house on the land purchased.

LTV

The loan-to-value figure for home loans is 75-90% while for land loans it’s capped at 70-80%. This figure refers to the ratio of property value that is usually sanctioned as a loan. Accordingly, land loans are smaller than home loans.

Hope this information turns helpful for you!