From buying to renovating: Choosing the right home loan

Let’s find out what different kind of home loans are and how they can help you.

A home loan can make the dream of buying a home a reality. (Representational)

For most Indians, buying a home is a lifetime aspiration. A home loan can make this dream a reality. Now, most of us think of home loans as a single, straightforward product but home loans have several variations tailored to different needs. Let’s find out what these are and how they can help you.

1. Home purchase loan: This is the most common type of home loan that can be used for purchasing a ready-to- move-in house, an under-construction property, or a resale flat. Most lenders offer this loan with either fixed or floating interest rates, for repayment tenures of up to 30 years.

2. Pre-approved home loan: If you’re house hunting and want to know how much you can borrow, a pre-approved loan can be useful. Here, the bank assesses your income, credit history and overall financial health, and gives you a sanctioned loan amount in advance. This type of loan speeds up the home-buying process once you have finalised the right property.

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3. Home construction loan: Planning to build your own house instead of buying one? This loan covers the cost of construction on a plot you already own. Typically, the loan is disbursed in stages as the construction progresses, for a tenure of up to 15 years.

4. Plot loan: If you want to buy a plot of land to build a house on later, this is the right loan. The loan amount depends on the market value of the land, your income, and your repayment capacity. However, do note that many lenders require you to start construction within a specific time frame after purchasing the plot.

5. Top-up loan: If you already have a home loan and need extra funds, a top-up loan can be a convenient option. You can use this money for anything, be it home improvements, funding a child’s education, or even a medical emergency. Interest rates for top-up loans are usually lower than personal loans, and tenures are flexible.

6. Home extension or renovation loan: Need to upgrade your kitchen, add a new room, or just repaint your house? This type of loan covers all renovation or expansion needs. It is usually smaller in size than a home purchase loan but still offers competitive rates and flexible repayment terms.

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7. Home loan balance transfer: Not happy with the rate, terms, or service of your current lender? You can transfer the outstanding balance of your existing home loan to another bank or housing finance company offering better interest rates or terms. This is an effective option if you’re looking to lower their monthly EMI burden or extend your loan tenure.

Choosing the right type of home loan depends on what stage of your homeownership journey you’re in, regardless of whether you’re buying, building, improving or simply trying to cut costs.

Understanding your options can help you make smarter financial decisions. Always compare lenders and read the fine print before signing on the dotted line.

Adhil Shetty is the CEO of BankBazaar.com

In this screengrab from a video posted on Sept. 4, 2025, Prime Minister Narendra Modi addresses the gathering during a meeting with National Awardee Teachers at his official residence, in New Delhi. (@NarendraModi via PTI Photo)

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