Despite a slow economy and GDP contraction, the demand for credit has been on an upward trajectory for various lending segments. As per an ICRA analysis,
- In November 2020, the retail loan sector grew by 9.2% from the previous year.
Another joint report by CRISIL and a leading financial institution revealed that –
- Housing loan and loan against property segments are forecasted to grow to Rs.46.1 trillion by FY24.
The foremost reason for this credit boom can be attributed to increased consumption and lower mortgage loan interest rates. Although several types of mortgage loans are available in the market, loans against property and reverse mortgages are among the most popular.
Nonetheless, individuals planning to apply for such a credit option need to know about this credit in detail before initiating the process.
What is a mortgage loan?
It is a secured credit option that individuals can avail of by hypothecating their immovable property. Generally, borrowers need to pledge their residential or commercial property to be eligible for this credit option. Using the funds, borrowers can address any of their personal or professional big-ticket expenses.
However, individuals sanction a loan against property only after assessing the eligibility of the applicant. For instance,
- The mortgage loan amount depends primarily on the borrower’s age, income, and location of the property.
- Lenders approve an LTV of up to 80% of the current value of the property pledged. For instance, if the price of a house is Rs.10 lakh, individuals will get funds up to Rs.8 lakh. The rest of the amount will remain as a spread of the lender.
Individuals should ascertain a high LTV before opting for this advance.
A mortgage loan is a secured loan in which the borrower needs to pay some kind of collateral as security against the loan amount. It is a tool that helps a user to calculate his monthly installments or EMI’s on mortgage loans.
For the calculation process, one must know The loan amount, Interest rate, Tenure & further calculation would be performed by EMI Calculator. Mortgage calculators are used by consumers to determine monthly repayments.
Features of mortgage loans
Following are some of the standard features of a mortgage loan that individuals need to consider while applying for this credit.
- The interest is transferred to the lender. However, the ownership of the property remains with borrowers.
- The tenor of the loan is flexible for up to 20 years. However, it varies with lenders.
- The property loan interest rate remains lower since it is a secured advance. However, you need to determine the floating interest rate vs fixed interest rate what is a better option when you opt for a LAP.
- During the tenor, individuals cannot sell the property until the amount is repaid successfully.
However, besides knowing these pointers about LAP loans and especially mortgage loan interest rates, individuals also need to know the property type that they have to pledge as collateral.
Property eligible for mortgage loans
Following are some types of properties against which individuals can avail of a LAP loan.
Individuals can pledge any of the properties mentioned below to avail of funds.
- Self-occupied property.
- Vacant property, which is undisputed.
- Rented out property.
Top HFCs offer loans against property to eligible candidates with competitive interest rates.
These institutions also extend pre-approved offers to expedite the loan application process. Besides loans against property, these offers are also available on a range of financial products, including home loans. All you have to do is enter your name and mobile number to check your pre-approved offer instantly.
Following properties also qualify for viable assets for a mortgage loan.
- Vacant property with undisputed ownership.
- Let out commercial property.
Individuals can use loans against property availed against the above-mentioned options to mitigate any of their financial requirements like wedding, travel, education, etc., without liquidating their savings.
However, in this case, also individuals need to estimate the EMI using an online loan against a property calculator.
Individuals can avail of funds by pledging a shared property as well. However, co-owners need to belong to the same family. They can share any of the relationships.
- Mother and son
- Father and son
- A parent and unmarried daughter.
However, in every instance, borrowers need to submit some necessary documents to prove their eligibility.
Therefore, to access the best deals, you need to compare different mortgage loan interest rates from lenders. Along with that, you also should know how to prepay your loan against property in 5 easy steps. It will help in improving your credit score significantly.