If you buy a plot, you’ll not only have a place to call your own, but you’ll also have the freedom to design it in any way you see fit. The number of bedrooms, location of the kitchen, style of the living room, etc. are all up to you. But as everyone knows, buying land can be costly, especially in locations with strong demand or in major cities. You would therefore need financing options such as a loan for plot purchase to finance the purchase to realize your ambition of owning land in a major city and having your dream home built on it.
You will need to choose a plot loan, which is distinct from a home loan if you intend to buy a plot. A house loan is meant to be used to buy a property that has already been built or is currently being built and will soon be available. Therefore, a loan for a plot purchase would not be appropriate if you intended to invest in a plot. Therefore, if you want to buy a plot, several lending institutions like Hero Home Financing offer a special category of financing known as a loan for plot purchase.
You should be aware, too, that some lenders won’t provide you with a house loan if you don’t have any intentions to build anything on the specific piece of property. Additionally, a lot of lenders incorporate the cost of building in the loan amount they offer.
Factors to take into account when buying a plot loan
A risky investment for lenders is a loan for a plot purchase. You could take into account the following criteria to reduce the lender’s risk as well as improve your chances of having a house loan accepted.
Debt-to-income ratio:
Before considering you for a land loan, lenders will look at your Debt-to-Income Ratio (DTI). The DTI ratio is essentially established by summing up all of your monthly debt payments. And dividing that total by your monthly take-home pay. You won’t be approved for a loan for plot purchase or will receive one at. An extremely high-interest rate if the DTI ratio is higher than 50%. Therefore, it is advised to pay off some of your obligations and reduce your DTI ratio prior to applying for a plot loan.
Create a budget:
If you want to invest in a plot, there are other expenses to consider. In addition to the EMI for the plot loan. In addition, a sizeable sum of money is needed for other expenses like paying the costs of the fencing, and insurance. And municipal taxes. Create a budget, and don’t spend more than you can afford to because doing so will trap you in a debt cycle.
Compare and evaluate interest rates:
You should keep comparing the interest rates provided by several banks before requesting a plot loan. Make a judicious choice and select the financial institution offering the lowest rate on the desired amount because the amount of the loan will be on the steep side.
Credit rating:
A CIBIL score is a numerical depiction of your financial situation that includes all of the details of your credit(s), loans, and borrowings, as well as the payback history for each. Before granting a loan for plot purchase, all lenders take the applicant’s CIBIL into account. If your CIBIL score is greater than 750, which shows that you have a history of timely. And regular loan repayment, you have the best chance of having your loan for plots approved.
Think about additional fees and charges:
When choosing a plot loan, you should take into account not only the interest rate. But also any additional costs or charges that may apply, such as processing fees, pre-closing fees, foreclosing fees, etc.
Documents needed to apply for a plot loan
- Loan application form was duly completed and signed
- Passport-sized pictures
- Residence evidence
- Photo identification proof
- Income documentation, including pay stubs from the previous six months
- Bank statements for information on current loans
- Processing fee checks were drawn from a business or salary account
- Recent pay stubs
Conclusion
Having your own piece of property gives you more freedom and choice to build the house of your dreams. Due to rising land costs, obtaining land ownership is now more feasible with a loan for plot purchase. Make sure to examine the interest rates, additional fees, and repayment terms. And eligibility requirements of financial institutions before submitting a loan application. Hero house finance alternatives offer flexible repayment options and reasonable house loan interest rates, leaving very little to be desired. You will also obtain the funds needed in no time thanks to our simple eligibility conditions. Minimum documentation needs, and quick loan processing!
