Types of Mortgages

In India, the mortgage market offers various types of home loans to cater to the diverse needs and financial situations of borrowers. Here are some of the most common types of mortgages available in India:

  1. Fixed-Rate Mortgage:
    • Similar to fixed-rate mortgages worldwide, these loans offer a stable interest rate for the entire loan tenure, typically ranging from 10 to 30 years.
    • Monthly payments remain constant, making it easier to budget.
  2. Adjustable-Rate Mortgage (ARM) or Floating Rate Mortgage:
    • ARM loans have an interest rate that can fluctuate based on market conditions and the lender’s policy.
    • The interest rate is often revised annually or semi-annually.
    • Borrowers may benefit from lower initial interest rates, but there’s a risk of rates increasing over time.
  3. Home Loan with a Step-Up or Step-Down Option:
    • Step-up loans start with lower EMIs (Equated Monthly Installments) and gradually increase over time, suitable for borrowers expecting their income to rise.
    • Step-down loans start with higher EMIs and decrease gradually, suitable for borrowers closer to retirement.
  4. Balloon Payment Mortgage:
    • Balloon mortgages require lower monthly payments initially but have a large lump-sum payment (balloon payment) due at the end of the loan term.
    • Borrowers often plan to refinance or sell the property before the balloon payment becomes due.
  5. Home Loan with an Overdraft Facility:
    • Some banks offer home loans with overdraft facilities, allowing borrowers to deposit any extra income into the loan account and reduce interest payments.
    • Borrowers can withdraw the excess amount if needed.
  6. Home Loan with a Flexible EMI Option:
    • These loans offer flexibility in EMIs, allowing borrowers to increase or decrease their EMI amounts within certain limits to align with changing financial circumstances.
  7. Home Loan for Women:
    • Many banks in India offer discounted interest rates for female borrowers, making it more affordable for women to purchase homes.
  8. NRI Home Loan:
    • Non-Resident Indians (NRIs) can apply for NRI home loans to buy property in India.
    • These loans typically have specific eligibility criteria and documentation requirements for NRIs.
  9. Pradhan Mantri Awas Yojana (PMAY) Subsidy:
    • The Indian government’s PMAY scheme provides subsidies to eligible beneficiaries, making home loans more affordable for economically weaker sections and low-income groups.
  10. Reverse Mortgage Loan:
    • Reverse mortgage loans are available to senior citizens in India, allowing them to unlock the equity in their homes and receive a regular stream of income while residing in the property.
  11. Loan Against Property (LAP):
    • LAP allows borrowers to use their existing property as collateral to secure a loan for various purposes, such as business expansion or education expenses.

When choosing a mortgage in India, consider your financial goals, repayment capacity, and the type of property you want to purchase. Interest rates, loan tenures, and eligibility criteria can vary among lenders, so it’s essential to compare offers from multiple banks or financial institutions before making a decision. Additionally, be sure to understand the terms and conditions, including any processing fees, prepayment penalties, and the impact of interest rate changes on your EMIs.

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