Mortage Loan
Overview
A mortgage is a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full. A mortgage is often referred to as home loan when its used for the purchase of a home.
As per the current rates, HDFC, HDFC Bank offers the lowest mortgage loan interest rate of 8.75%. These rates can vary depending upon the value of the property, your occupation and repayment capacity. Higher the loan amount, higher will be the rate of interest.
Loan against property is another name of mortgage loan and is available for both salaried and self-employed borrowers to help them fulfil their business and personal needs by mortgaging their property. Some of the basic purposes for which this loan is usually taken are expanding business, acquiring assets, education needs, marriage, etc. The loan is granted against the mortgage of the residential/commercial/industrial property. The end use of the loan should be from the uses allowed by the bank.
Types of Loan against property
- Business expansion
- Acquiring assets
- For marriage or any medical emergency
Loan Against Property Dec 2020
Mortgage Loan in India
RBI keeps Repo Rate unchanged at 4%
| Lowest Interest Rate | 7.90% |
| Processing Fee | Upto 1% of loan amount |
| Loan Tenure | Upto 20 years |
| Lowest EMI Per Lakh | 830 for 20 years |
| Prepayment Charges | Nil charges |
- Option to get direct call from HDFC, PNB Housing Finance, Axis Bank, Citibank, ICICI Bank
- Compare and get best Loan against property interest rate for salaried and self employed.
- Check your loan eligibility at Loan against property Eligibility Calculator
- Check Best Offers starting @ 7.90%
Apply for Home Loan @ 6.75%
Home Loan Dec 2020
Compare Loan Against Property LAP Interest Rates All Banks Dec 2020
| Bank | Loan Against Property Rate | Processing Fee |
|---|---|---|
| SBI Loan Against Property Rates | 8.80% | 1.00% Max ₹ 50,000 |
| Axis Bank Loan Against Property Rates | 8.75% | 1.00% Min ₹ 10,000 - Max ₹ 10,000 |
| HDFC Loan Against Property Rates | 8.75% | 0.25% |
| ICICI Bank Loan Against Property Rates | 8.90% | 2.00% Min ₹ 5,000 - Max ₹ 10,000 |
LAP Loan
Loan against property is another name of mortgage loan and is available for both salaried and self-employed borrowers to help them fulfil their business and personal needs by mortgaging their property.
Purpose
Some of the basic purposes for which this loan is usually taken are expanding business, acquiring assets, education needs, marriage, etc. The loan is granted against the mortgage of the residential/commercial/industrial property. The end use of the loan should be from the uses allowed by the bank. The borrower is required to declare the end use of the loan in its application form.
| Purposes For Which Loan Against Property Is A Good Option | Purposes For Which Loan Against Property Is Not A Good Option |
|---|---|
| Business expansion | Home purchase |
| Child Education | Home construction |
| Personal expenses such as wedding or vacation | Home renovation |
| Medical emergency | Plot purchase |
Points to remember are:
- Loans for home construction or purchase are available at lower rate of interest under home loan as against mortgage loan.
- Banks will take an end use undertaking on the loan against property and will also check the actual usage of the loan on a regular basis.
- Top up loan taken on existing loan against property customers can be used for purposes such as business expansion, education, medical expenses etc.
Loan Against Property Eligibility Check
You may be eligible for property loan in India from one or more banks if you meet the following eligibility conditions:
| Parameters | Eligibility Criteria |
|---|---|
| Minimum and Maximum Age | Banks give loan upto a period of 15 years depending upon your age Note: However, some banks may not offer a loan against property for more than 7 years or 9 years. Only selected banks offer mortgage loan up to 20 years. |
| Net Monthly Income |
|
| Employment Type and History |
Note: Eligibility conditions for self employed may be different from that of salaried customers Also, note that mortgage loan rates may be higher for a salaried customer as compared to a self employed or a business men. The reason is that salaried customer tend to take a loan for personal purposes while self employed borrower are more likely to take a this type of loan for business purposes. |
| LTV | Banks typically give mortgage loan for a LTV of 60-70%. The LTV ratio differs by type of property. LTV ratio is highest for loans taken against residential property, while LTV ratio is lowest for loan against commercial property
|
| CIBIL Score for Loan against property | Banks gives loan based on market value or registered value of the property, whichever is lower.
Note: In case of low CIBIL score, you can be eligible for few banks or NBFCs with some additional conditions like higher interest rate and higher margin. |
How to get best Mortgage loan?
It is easy to avail mortgage loan online by comparing loan against property interest rates, processing fees and other loan terms and conditions of all banks. It is advisable to follow the following steps to get a hassle free, lowest cost and most transparent property loan.
Step 1 : Check loan eligibility and EMI
Once you decide to take a property loan, estimate your loan amount eligibility to know the loan amount you will be eligible for and can apply for. Also, calculate the monthly EMI that you can easily repay based on your current net income and other existing fixed obligations including rent and EMIs on other existing loans, if any. Your loan eligibility is calculated based on your age, net income, existing obligations, property type, LTV ratio and other factors. EMI is dependent on the loan amount, interest rate and tenure.
Step 2 : Check property approval status and legal documents
The property against which loan is to be taken is required to have a clean title, all statutory and government approvals as well as complete set of property documents. Some of the property related documents that a lender will require are: Registered Sale Deed/ Conveyance/ Lease Deed, Past Sale Deeds Chain (each transaction in respect of this property since first allotment), Latest House Tax Return/ Receipt, Approved Building Plan from Municipal Corporation etc. Hence, choose the property with all records and clean title for taking a loan against. Also loans against residential properties are easy to get with a low rate of interest and should be first choice of property for this loan option.
Step 3 : Decide on type of mortgage loan interest rate offers
Once you have a sense of your eligibility and the property you can borrow against, you can proceed to check the various mortgage loan offers of different banks for different products. Key aspects of interest rate offers that need to be checked are:
- Choice between fixed and floating rates. Fixed rates come at a slightly higher rate of interest compared to floating rate loans and interest rate remains constant during the tenure of property loan. In floating rate loan, interest rates are reset at periodic intervals in response to changes in repo rate and PLR rates. Majority of loan against property in India today are floating rate loans as it allows the interest rates on LAP to move in accordance with the current interest rates.
- You can also evaluate the option of overdraft facility with property loan. The overdraft facility allows to you to deposit surplus amount in your Loan against property overdraft account when available and hence, reduce your overall interest amount outgo and also shorten your loan tenure. This loan is highly recommended to self employed businessmen who generally have surplus cash lying idle at home. The interest rates on overdraft loan is slightly higher than that of a regular mortgage loan interest rates.
Do mortgage loan interest rate comparison of the banks on various types of mortgage loan products and take an informed decision.
Step 4 : Compare other charges and loan parameters of the shortlisted banks
Banks also charge other additional fees on property loan in addition to LAP interest rates, so you should know all the additional fees and charges with a Loan against property which include prepayment charges, processing fee, insurance premium and other charges applied by the shortlisted banks. You can take the help of loan advisors of online marketplaces like Sai Ram Financial.in to be able to get complete details on loan against property rates, fees and charges of all banks and take an informed decision.
Step 5 : Select the bank based on other service related parameters
When you decide to take a loan you should also look after other services and transparency related parameters of the chosen banks. Some of these factors are turnaround time offered by the banks, quick loan delivery, doorstep services, transparency in the loan process. You also need to understand the trends and changes in repo rate over a period of time. Last but not the least, read reviews of existing customers on websites, about interest rates and transparency to make a firm decision of borrowing loan from a bank.
Mortgage Loan Process
Once you have done complete research on the loan offers available in the market and have shortlisted the bank from where you want to take loan, you go through the following steps to complete your loan process and get a loan sanction:
- Firstly, fill the online loan application form or visit the branch where you will have to fill a loan application. The bank representative will ask for your basic loan requirements (loan amount, tenure, income level etc) and ask you to fill personal, occupation and income details in the application form.
- On the basis of information provided by you, lender will calculate your loan eligibility and give you loan options as per your requirements like interest rates, processing charges, required documents, lock in period etc. In case your eligibility does not match as per the bank, the lender advise you either to submit some additional documents or to add co-applicant to increase your eligibility.
- Post filling application and the above discussion (which can be tele-discussion), lender will arrange a meeting with you to collect photocopy of your documents which include KYC, income documents and property documents and will also discuss about property approval process. A bank representative will come and collect the documents from the address specified by you. At this stage the bank may also collect the processing fees and other legal and technical charges from you.
- Bankers will initiate the legal and technical verification. He can also give a call on your residence number for tele - verification and visit your residential address or office to check the information provided by you is authentic. Bankers will visit the site for property verification and come out with property evaluation report which gives an estimated market value of the property as well as feedback that the property has a clear title, complete set of documents and has no technical deviations. The bank will confirm your loan amount eligibility based on the above assessment.
- Once the bank gets satisfactory results from the above checks, it will approve your loan, issue a sanction letter and proceed towards initiating the disbursement process. At the time of disbursement, you have to submit original property documents as well mortgage registry document duly signed and registered to the bank. Mortgage registry process can take 4 to 5 working days. Bank officials or Sai Ram Financial representatives will assist you at each step of the process.
Mortgage loan process can be cumbersome. However, with continuous assistance and doorstep services of the bank as well our representatives, we have managed to make the process of getting mortgage loan easy and customer friendly for our valued customers.
Documents Required for Loan Against Property LAP
- Signed Application Form
- Identity Proof (PAN)
- Residential Address Proof
- Form 16
- Latest 6 months salary slip for salaried
- Last 6 months bank statement
- Last 2 years ITR
Top Home Loan Providers
| Documents Required | Individuals | Firms, Partnerships |
|---|---|---|
| Identity Proof | PAN card, Passport, Driving License, Aadhar Card, Voter id, Govt issued i-card | PAN card, Passport, Driving License, Aadhar Card, Voter id, Govt issued i-card |
| Certificate and Proof of Business Existence | PAN , sales tax/ excise/ VAT/ service tax registration, Copy of partnership deed, Trade license, certificate of practice, registration certificate issued by RBI, SEBI | |
| Address Proof | Passport, Driving License, Election ID card, Electricity/ Telephone/ Mobile bill/ bank statement (not more than 3 months old) | Bank statement, utility bill, Registry copy, lease or rent agreement, TAN allotment letter |
| Age Proof | PAN card, Passport, Driving License, Voter id card, Birth certificate, Employee ID card (only for PSU/ Government employees), School/ college leaving certificate | PAN card, Passport, Driving License, Voter id card, Birth certificate, Employee ID card (only for PSU/ Government employees), School/ college leaving certificate |
Reverse Mortgage
A reverse mortgage is a collateral loan which requires an individual to pledge the rights to his home to the lender in return for a regular income. It is a unique credit option specially designed for senior citizens. The scheme does not require making monthly payments, instead an individual needs to mortgage his or her residential property to avail this loan. It provides an individual with an option to access the unencumbered value of a property.
How to take a Reverse Mortgage?
A reverse mortgage is available to an individual over the age of 60. If a couple is willing to opt for a mortgage loan, one of the applicants should be above the age of 60 years. Some banks allow the other spouse to be 55 and above, while some require the other spouse to be of minimum 58 years.
- Individuals must have a fully owned house. In the case of a couple, at least one of them must own a house. In some cases, banks take over the home loan and pay off the balance in monthly instalments to the borrower.
- The property must have been at least 20 years old.
- The property must be the permanent residence of the individual.
- The property cannot be inherited or a gift. It should be self acquired.
- Property used for commercial use is not eligible for the reverse mortgage loan.
How does a commercial property loan work?
Commercial property loans have evolved themselves from fulfilling short-term financial needs to the management of payroll and purchasing supplies. Commercial loan helps in meeting the business requirement. Commercial loans can either be repaid in a defined time limit or a repayment tenure that is chosen by the borrower as per his requirement. It is a type of mortgage loan secured against commercial property and is offered with flexible repayment options but a borrower must pay the loan amount completely with the interest accrued in the specified tenure on time to forgo loan default and damage to his credit worthiness.
Commercial Property Loan
Commercial Property Loan as the name suggests is the loan provided to the business or commercial entity by the banks and financial institutions. It helps in meeting the financial requirement of business for expanding business, availing new technology, hiring new employees, maintaining inventory and others such purposes.
RBI Monetary Policy Highlights
From 1st October 2019, loan against property has been linked to external benchmarking which is based on repo rate. Most of the banks have already linked their mortgage loans to Repo Linked Lending Rate i.e. RLLR.
RBI has also brought NBFC’s under the purview of the RBI’s Banking Ombudsman scheme. This will help speedy resolution of disputes between customers and NBFC’s and give a window to the customers to submit their grievances.
FAQs
1.Which bank is best for loan against property?
is the best bank for taking a loan against property based on its current mortgage loan rates as the bank offers low interest rate of 8.75%. Best Banks for taking mortgage loans based on processing fees are: Jammu And Kashmir Bank charges the lowest processing fees of 0.20% as a % of loan amount. Federal Bank caps the processing fees to a maximum of ₹ 7,500 irrespective of the loan amount
How can I apply for Mortgage loan?
You can apply for loan in several ways. You can directly visit the bank branch and meet the sales person, contact a loan agent or apply online at any bank or NBFC’s website. You can also check and compare best mortgage loan interest rates in all banks online at Sai Ram Financial and apply for loan.
What is the difference between home loan and Loan Against Property?
A home loan is availed to buy or construct a new residential property. While, loan against property can be availed for any reason. Under home loan, the property you want to buy is transferred to the bank as collateral as and when they provide you with the loan. However, in case of loan against property, you submit your already owned property as collateral, and it can be either a residential property, commercial, land or industrial property. The lowest interest rate on home loan is 8.10%. However, in case of loan against property, you submit your already owned property as collateral, and it can be either a residential property, commercial, or industrial property. The lowest rate on mortgage loan 7.90%.
What is Mortgage loan?
A mortgage loan is a type of loan in which borrower is required to mortgage any type of property to the lending institution like it basically act as security against loan if in case someone fails to pay back the loan then the remaining amount can be raised by selling that property.
What is the minimum and maximum tenure of loan against property?
These are generally taken for a longer period of time. The loan tenure for loan against property ranges from 1 years to 20 years.
What is the downside to a reverse mortgage?
There are losses associated with home loans like the higher interest rate and a burden on heirs due to reverse mortgage loans.
What is a reverse mortgage in simple terms?
A reverse mortgage is a mortgage loan, generally secured by a residential property that helps the individual to access the unencumbered value of the property. The loans are typically provided to older homeowners and do not require monthly mortgage payments.
What are the charges for Loan against property?
In addition to mortgage interest rates, banks charge the following fees on loan
- Processing fee: This fees is charged when you apply for a loan. The processing fee can range between 0.50 -1% of the loan amount and can be negotiated down, if you bargain. If you approach the bank through an online market place, we will assist you in negotiating with the bank and also, get attractive cash backs on sanctioned loan amounts. Sometimes, we also get to offer exclusive loan schemes on behalf of the banks such as nil processing fees for our valued customers.
- Foreclosure fee: This fees is charged when you decide to close your loan before the completion of loan tenure. Banks charge nil prepayment penalty on individuals having floating rate loans. You also need to read the terms and conditions of your loan agreement carefully to check on the prepayment clause and ensure that it is not too strict compared to market benchmarks.
- Other Charges: Banks charge legal and technical fee from the borrower which are explained at the time of loan processing.