Understanding the Difference Between Home Loan and Land Loan

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When you are planning to buy a property or land, you may need a loan to help you with the payment. There are two types of loans you can choose from: a home loan and a land loan. While both can help you buy property, they are different in certain ways. Let’s explore these differences and similarities in simple terms.

Similarities Between Home Loan and Land Loan

  1. Approval Process: The way lenders check your eligibility is the same for both home loans and land loans. They will check your income, credit score, and other factors before they approve the loan.
  2. EMI Options: For both home and land loans, EMIS applicable. You can also apply for a co-applicant if needed, and the rules for this are similar for both types of loans.

Differences Between Home Loans and Land Loans

1.Purpose and Location:

  • Home Loan: This loan is for buying a ready-to-move-in property, a property under construction, or one that you plan to build yourself.
  • Land Loan : This one is for the purchase of a plot of land, which will be used strictly for residential purposes.

2.Loan-to-Value Ratio (LTV):

Home Loan: You can get up to 75-90% of the value of the property. So, you pay just 10-25% in a down payment for the property.

Land Loan The maximum loan will be 75-80% of the land's value. Hence, one needs a bigger down payment, at least 20-25%.

3.Loan Tenure:

Home Loan: A home loan is paid out over a very long-time period, normally up to 30 years.

Land Loan: The repayment period of the land loan is up to 15 years, as the repayment period for the loan is quite short.

Tax benefits:

Home Loan: Tax benefit is available on the interest as well as principal repayment of a home loan.

Land Loan: No tax benefits can be availed with the land loan. But if you build a house on that land after getting some construction loan then tax benefits can be availed on that construction loan.


Aspect

Home Loan

Land Loan 

Purpose

Ready property, under-construction, or self-built homes

Plot of land for residential use

Loan-to-Value Ratio

75-90%

75-80%

Loan Tenure

Up to 30 years

Up to 15 years

Tax Benefits

Available on principal and interest payments

Only available on construction loan

Approval Process

Same for both types of loans

Same for both types of loans

EMI Options

Same for both types of loans

Same for both types of loans



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