Constructing one’s own beautiful home on a piece of land is every man’s dream. And if you happen to be one of those lucky few with a piece of land at your disposal, then it’s time that you thought seriously about constructing your own home.
Frankly speaking, constructing a house is no walk in the park. You need to have the necessary financial wherewithal to meet the escalating costs of the project. In other words, constructing a house involves a lot of money. In this situation, you can make arrangements for necessary funds by applying for a Home Construction Loan. You can either employ a contractor for the job or handle the entire thing all by yourself. The choice is yours. You also need to keep in mind that the process of approval and disbursal of the home construction loan is different from the regular Home Loan. Before you choose the lender, you should do thorough research of the different financial institutions and review their interest rate, documentation requirements and loan terms.
Four Must-Known Facts About Home Construction Loan
HOW MUCH ARE YOU ELIGIBLE FOR
A construction loan, which is also known as a “self-build loan", is considered a short-term loan that is sanctioned by a bank to finance the building of a home or another real estate project. As for the loan amount that you are eligible for, it depends on your income and repayment eligibility. You can be eligible for construction loans up to 80 - 85% of the value of the property.
A REAL MONEY SAVER
Borrowing a home construction loan would definitely help you save more money in the bargain. Ideally, you should settle for an owner-builder construction loan; it would save money on the labour. On the other hand, if you hire a builder to do it for you, the construction cost in all probability would shoot up.
Loan Disbursal Process
When you apply for a home construction loan, the amount will be disbursed in instalments only. This is, however, not the case with home purchase loans, where the lender pays you the full amount in lump sum. However, in the case of home construction loans, one should tread carefully. The approved loan will be disbursed in phases, depending on how much progress the construction has made. Most banks in India, as a rule, pay the approved loan amount in about 3-5 instalments. This obviously implies that you must have sufficient funds at your disposal to purchase the raw material and get started.
The bank which has sanctioned your Land purchase and construction loan must be convinced that the work is making smooth progress. It is only then that the bank concerned would disburse the loan.
Using Construction loan for interior work:
Home loan for self-construction is generally sanctioned for the immovable construction works. And it is always ideal to check with the concerned institution, whether the sanctioned construction loan can be used for interior work or not?