When individuals need money to meet any urgent need, the first thing they tend to consider is a loan. Many, however, find it difficult to decide the loan that would be most appropriate for them. While some concerns are justified, financial experts say that a mortgage loan, also known as a loan against property, is one of the most secured loans. It also bears comparatively lower interest rate compared to the other options. Most importantly, it permits the borrower to use the value locked up in their property as they continue to occupy it during the loan tenor.
What is Mortgage Loan?
A mortgage loan is one whereby a borrower secures funds by pledging property. With mortgage loans, the borrower is at the liberty to use the money any way they desire. There is no restriction on how the sanctioned money will be used. A borrower can use the fund toward home-related expenses or fulfill any personal or business needs.
Mortgage Loan Benefits
If a borrower has a healthy credit score and is prompt with EMI payments, there are hardly any lucrative options besides LAP. Here’s why:
Sanctions Can Be Availed of By All
A loan against property is not only for salaried individuals, but also sanctioned to self-employed professionals and businessmen. In the case of a mortgage loan, the current property value along with the borrower's income, determines eligibility for a mortgage loan. Besides, credit history and age also determine the loan amount and its repayment terms. To be eligible for a loan against property, the following are essential:
● Minimum Age: 18 years
● Maximum Age: 70 years (at the time of loan maturity)
● Resident Type: Resident Indian
● Loan Tenor: Up to 18 years
Helps Obtain a Sizeable Sanction
Based on a lender’s policies, a borrower is eligible to secure a mortgage loan of up to 70–75% of the current property. Besides, borrowers may also benefit from typical long tenors (up to 18 years) permitted in a loan against property.
Guarantees Lower Mortgage Loan Interest Rates
A mortgage loan typically has a lower interest rate than other forms of unsecured borrowing. Choosing to have fixed monthly repayments means that a borrower can accurately use them in planning and forecasting, empowering them to structure the financial goals with more certainty.
Imposes Zero Restrictions on End Use
A mortgage loan helps manage all big-ticket expenditures comfortably. A borrower can use the fund sanctioned via a loan against property for purposes, including but not limited to the following: wedding, debt consolidation, overseas studying, and home purchases. Thanks to the significant sanction a mortgage loan entails, it can cover all these expenses seamlessly.
Involves Simple Documentation and Quick Disbursal
Compared to other kinds of unsecured loans, a mortgage loan involves a less complicated documentation process and quick disbursal. Besides filling up the application form and providing valid proof of identity, income, and address, a loan applicant will need to submit property ownership documents with a valuation report. It is to be noted that all applicants must ensure that all information provided in the documents is correct and complete. Failing to do so may result in rejection.
Allows Balance Transfer
The balance transfer facility helps move a loan from one account or lender to another, eliminating a borrower's high-cost debt. Based on the borrower's credibility and financial profile, they can secure the most appropriate loan available.
A loan against property balance transfer facility permits a borrower to transfer the outstanding principal on an existing loan against property to another at a lower mortgage loan interest rate. It helps reduce EMIs significantly, and saves more on interest costs, lowering the total debt burden. Moreover, you also get the option to negotiate better borrowing terms with a more trusted lender.
How to Apply for Mortgage Loan
To apply with any lender online, a borrower needs to follow a few steps:
● Visit the official website of the lender and navigate to the Loan against Property section
● Before applying, the borrower must check their eligibility for the mortgage loan
● Besides checking the eligibility, they must also check other details, including the interest rate and other charges
● If they are comfortable proceeding with the mortgage loan application, they can proceed to fill in the application form and upload all required documents
Once the verification is complete, the lender is expected to sanction the loan amount in about a week or less.
Top Three Tips for Getting the Best Mortgage Loan
Applying for a loan against property can sometimes be a confusing and frustrating experience for prospective borrowers. However, it does not have to be so. By following the mortgage tips mentioned below in mind, an applicant can make the process easier.
▪ Maintaining Credit Score: The CIBIL score impacts the types of loans a borrower is eligible for, how much money can be sanctioned, and mortgage loan interest rates. Hence, keeping a track of one’s credit scores and ensuring they are ideally above 750+ is prudent.
▪ Understanding mortgage loan options: By knowing all mortgage loan options before applying, a borrower can make sure that the lender chosen offers the best type of loan. The various types of mortgage loans typically include the following:
o Home loan
o Loan against residential/commercial property
o Lease rental discounting
▪ Set a budget. Use a mortgage loan calculator to determine the amount one can borrow and repay comfortably and stick to it.
The Final Word
Buying a property is a big purchase and a big decision. One must take enough time and consider all options. It is essential to educate oneself about the current market, financial requirements, and the overall mortgage loan process so that a borrower knows what to expect.