There are many homebuyers who do not understand the difference between buying a home/apartment and buying land. It may be considered the same as they fall in the same category. However, there are many differences when observed closely.
Similarly, there is a difference between a land loan and a home loan. And if you are someone who is thinking of buying land or an apartment, it is very important that you understand the difference between a home loan and a land loan.
A home loan can be used to buy a ready to move-in flat or an under-construction property, whereas a land loan can help you buy land that may be later used for building a home.
Let’s take you through the differences in detail.
Interest Rate- A rough estimation of 7.50% per annum.
Tenure- Up to 30 years
Eligibility- Home loans are offered to applicants based on their:
Sources of income
Interest Rate- A rough estimation between 8% & 10% per annum.
Tenure- Up to 15 years
Eligibility- Land loans are offered to applicants based on their:
Sources of income
Let’s compare the two for a better understanding
Home loans can be given to buy properties at any location.
When it comes to a land loan, the land should be within the limit of the municipality and should not be in any village or industrial area.
Loans for under-construction, self-constructed and ready to move-in properties.
Loans only to purchase a land that will only be used for residential purposes.
Depending upon the loan amount one can get a loan of approx 75 - 90% of the cost of the property.
Depending upon the loan amount one can get a loan of approx 75 - 80% of the cost of the property.
Tax benefits can be achieved on both the principal amount and the interest of the home loan.
No tax benefits are available on land loans. It can only be possible on the amount borrowed to build on the land.
Though there might be differences between a home loan and a land loan, the application process remains the same. Both the loans have their own advantages and disadvantages, it is advisable to choose the loans as per your requirements. In both cases, your credit score plays a very important role.
Understand the purpose and then decide which loan you are looking for.