People take loans to fulfill many dreams of life. However, despite economic growth, retail loan demand is steadily decreasing in India. The two major reasons for this are sluggish consumer demand and high-interest rates on loans.
A loan against property or mortgage loan is different from a conventional one in that it allows you to avail of a higher loan amount by paying much lesser EMI. This article lists the 5 critical things you must know before applying for a loan on your home.
1. Who Can Apply For Loan Against Property?
Both individuals and people running businesses can avail loan against property.
Individuals avail loan against residential property for funding children's higher education, marriage, foreign travel, medical expenses, buying a home or car, and other such things.
Businesses avail loan against commercial or personal property to fund business expansion, product development, research and development, marketing, and other requirements.
2. What Are The Benefits Of Loan Against Property?
There are several benefits of loan against property. They are:
i. Low-Interest Rate
Since this type of loan is secured, the interest rate is much lower than other conventional loans.
ii. Repayment Tenure Is Longer
As the chances of defaulting are almost nil, lenders offer a longer repayment tenure, which brings down the EMI amount.
iii. Realizing The Actual Value Of The Property
Taking a loan on a home allows you to unlock the true value of your property. It's a good way to get a lump sum amount while still enjoying the ownership of the property.
iv. Easy Loan Approval Process
Since the loan is secured, there is minimal documentation required. The loan gets easily approved as well.
3. What Documents Do You Need For Availing A Loan?
Both salaried and self-employed professionals need to submit documents like PAN Card, Identity proof, passport size photographs, and property-related documents.
Salaried people have to submit 3 years' income tax returns and bank statements for the last 6 months.
Businesses need to produce additional documents, like audited income tax returns, bank statements, Incorporation Certificate and partnership deed (if applicable), and details of the shareholding pattern.
4. What Is The Interest Rate For Mortgage Loans?
The loan against property interest rate depends on the type of property you are willing to mortgage.
At present, the floating rate of interest for a loan against commercial property is between 10.50% and 11%. For a loan against a residential property, the floating rate of interest is between 10.25% and 10.75%. For a loan against a residential or commercial plot of land, the minimum rate is 11.25%, and the maximum is 11.75%.
Before applying for a loan, visit the lender's website to get the latest rates.
5. How To Choose The Best Lender?
Choosing the best lender saves you from unnecessary hassles. Choose a lender that has pan-India network coverage and offers doorstep loan delivery. Also, enquire whether your lender allows an increase in the loan amount in case of cost escalation. A reputed lender not only gives you longer repayment tenure but also flexible options for loan repayment.
Whether you are a salaried professional or run a business, taking a loan against property is the best way to fund your aspirations.
However, since your property will be at stake, apply for mortgage loans only when you are sure about paying it back. Putting the loan amount on speculative activities may jeopardize your ownership of the pledged property.