How to Buy Cheap Home Construction Loans?

Nothing equals the joy of constructing your dream home right from the base. Unlike ready-made residential properties, you have the freedom to incorporate subtleties into your home designs. A custom made home is a stable heirloom, but it’s an expensive affair. 

The good news is there are plenty of affordable home construction loans offered at a cheap interest to help fuel your dream of a lifetime. Read this blog to learn more about landing a construction loan for your dream house project. 

Who’s eligible?

It’s important to understand that home construction loans are not available to buy land but for construction on a pre-owned property. 

How many types of house construction loans?

Home loans for construction comprise:

Only landowners who require financial aid to construct a house may apply for this loan. It’s different from usual home loans because the lending organisation finances the entire project during the construction period. Taking a loan for funding under-construction properties provides inclusive tax benefits.

  • Construction-to-permanent loan
  • Construction-only loan

A construction-to-permanent loan comprises a single loan where the customer has to pay interest against the loan while your home undergoes construction. Lending organisations offer a temporary construction-only loan at a costly rate. On completion of construction, get converted into a construction-to-permanent loan. 

The collateral against both loans is your land and under-construction house. 

What paperwork do you need for house construction loan approval? 

To receive a green light on your home loan finance, submit a copy of the following documents with your loan application.

  • Landowner proof (papers confirming that the house intended for construction shall take place on your land)
  • Clearance permission from local government (municipality or corporation)
  • House plan along with the estimated cost of construction (it’s vital for deciding the accurate value for loan release)
  • Credentials of the management undertaking the construction responsibility (construction license)
  • Your KYC documents
  • Income proof

For newbies, construction loans cover the expenses for building the structure only. Furnishing or imparting further designing not mentioned in the submitted house plan doesn’t come under coverage.

Why apply for a construction-to-permanent loan? 

This home loan finance comes with flexibility both in repayment and release. The loan amount stays fixed against construction phases, meaning you’ll receive a certain sum of the loan upon completion of a particular construction. If your total construction-to-permanent loan is worth INR 1-crore, you may receive it in 10 phases worth 10-lakhs each. You pay interest on the released amount and not the complete loan. 

Why apply for a construction-only loan? 

Customers get a small loan amount lent in a steep interest to complete the construction. Next, the release of the remaining loan amount proceeds at the pre-agreed rate. The following criteria matter when applying for construction-only loans.

  • Very high CIBIL score
  • The previous record of repaying a bulk loan in time

This loan may sound convenient given its two steps of funding. It also carries additional expenses and extra paperwork, an uncomfortable option while on a tight budget.


House construction loans carry significant risk without proper assessment. For newbies, approach lending organisations for certified builders who are experts in such undertakings. Besides, you can get cheap construction financing minus the headache of additional expenses while your dream home gets built.

Also Read: Business Tax: Who Has To Pay It And How It Is Calculated

Uneeb Khan
I love Web Surfing. Writer. Blogger. Self-Believer.| I love to grab the latest news Knowledge and share the fresh dose of technology, lifestyle, travel, how-to’s, life lessons through the social platform and my blog. At my free time I love to read new things and write the post of my blog and share with my social locality.