Most individuals seeking a significant amount consider a mortgage loan for financial assistance. A mortgage loan refers to a loan secured against an immovable asset that can be pledged to avail of the loan. A loan against property (LAP) is one of the types of mortgage loans. It is crucial to make an informed decision for smooth mortgage loan processing after considering key factors. Let us explore vital considerations before taking the leap into a mortgage loan.
- Understanding Eligibility
Service providers, traders, manufacturers, business entities, and self-employed individuals can apply for a loan against property. Salaried individuals are not eligible for a loan against property with most lenders. Lenders look at age, income stability, credit score, property valuation, existing financial commitments, business continuity. The age limit is 25-75 years. Applicants should be in the existing business for a minimum of three years. However, there is no such predefined monthly income for a loan against property.
- Property Valuation
Before seeking a mortgage, you should have a clear understanding of the value of the property you intend to mortgage. It will help you determine the loan-to-value (LTV) and also ensure that the loan amount aligns with the property value. A loan against property can offer financial assistance of up to 75% of the property value and the mortgage loan amount can be between Rs. 20 lakh and Rs. 8 crore. However, borrowers should apply for a loan amount that they can afford to repay conveniently. To assess repayment ability, borrowers should consider their current earnings, income stability, and financial obligations.
- Property Ownership
The property title should be in the name of the borrower to apply for a loan against property. Lenders check the legal ownership and ensure that there are no disputes related to the property title before accepting a loan against property application. Elderly people who are owners of a property can apply for a reverse mortgage loan in India. It can offer an LTV of up to 80% and repayment tenure can be up to 15 years.
- Gather Required Documents
Understand the documentation requirements to avail of a loan against property smoothly. Loan applicants must have all the necessary documents, including property-related documents, income proof, ID proof, address proof and other relevant documents that lenders ask for.
- Interest Rates and Fees
There are two types of interest rates on mortgage loans – floating and fixed rates. Floating-interest rates are slightly lower than fixed rates on mortgages. Since the lending rate remains the same throughout the loan tenure and the lender cannot change interest rates even if the repo rate increases, fixed-rate mortgages are usually a notch higher than floating rates. Also, borrowers should consider other fees, like processing fees, prepayment charges, etc.
- Repayment Tenure
Look at the lender’s policy for loan repayment tenure. Loan tenure should be flexible enough to repay the loan conveniently. A shorter-term loan generally results in higher EMIs (Equated Monthly Instalments). But it helps to lower overall interest costs. On the contrary, longer repayment tenure may reduce the amount of monthly payments but increase the interest costs. With renowned lenders, customers can choose a loan tenure of up to 10 years.
Conclusion
These are the tips paving the way to get financial support through a mortgage loan or other types of mortgage loans, like a reverse mortgage loan in India. Make a confident decision while leveraging your property for financial assistance.