What is Mortgage Loan?
A mortgage loan is a secured type of loan that holds your property mortgage in exchange for a sizable sum. This means as a borrower, you can keep the property as collateral with the lender and obtain a loan in return. The lender will hold your property till the time you pay off the entire loan amount within the stipulated period. Before we get into mortgage loan interest rates, let us first have a look at the different types of mortgage loans offered in India.
Types of Mortgage Loans in India
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Home Loan
Home loans are the most common type of mortgage loan in the market. One can apply for a smaller or larger loan amount due to competitive rates of interest. Besides, flexible repayment tenors and tax benefits also add on to the perks. Such a loan can be used to purchase, renovate or construct a house but not for business or personal needs.
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Loan Against Property
A loan against property or LAP is usually offered for residential and commercial properties. Such loans are repaid in instalments. Several banks and lending institutions provide borrowers with an option to calculate monthly EMIs using a loan against property EMI calculator for convenience. Such loans usually have a tenor extending up to 18 years.
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Commercial Purchase
Such loans are popular among entrepreneurs and businessmen. These are usually take to purchase commercial spaces, like an office, shops, or commercial complexes. Funds avail of under this loan can be use only to buy commercial properties.
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Lease Rental Discounting
Many people choose to lease their own commercial or residential properties – it is a common practice. Mortgage loan can also be taken against such leased properties. This is call as ‘lease rental discounting’. The rent amount for each month is convert into affordable EMIs and the loan amount is offered based on that. The amount and tenor of the loan depends on the duration for which the property is going to be lease out.
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Second Mortgage Loan
NBFCs and banks also offer mortgage loans for properties that are already under a loan. For instance, if a borrower takes a loan to purchase a property, he/she may opt for an additional loan on the same property for personal needs. It is popularly familiar as a top-up loan. The lender will further offer the required loan amount provided the borrower has a good credit score and loan repayment record. In such cases, however, the borrower has to start paying the EMIs of the second mortgage loan alongside the first one.
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Reverse Mortgage
A reverse mortgage loan is a smart way for senior citizens to avail of funds against a property in their name if they are in need of some liquid cash. The own property can then be keep mortgage and money can be borrow and pay back through easy instalments.
Mortgage Loan Interest Rate: How to Choose the Right One
The rate of interest plays a vital role in picking the best suited loan since the rates increase with the increased value of the loan amount. The mortgage loan interest rate also depends on multiple factors, like the borrower’s occupation, monthly or annual income, CIBIL score that evaluates their ability to repay loan etc. Ideally, lenders desire a CIBIL score of loan against property equivalent to 725 or higher, so make sure you clear off any outstanding dues and credit card bills beforehand.
Coming to the different types of interest rates available on property loans, the most common two are as follows:
Fixed Rate
Under this, the mortgage loan interest rate remains the same throughout the tenor, so the monthly instalments neither increases or decreases.
Flexible Rate
The rate of interest under this remains low initially but tends to fluctuate in the future based on any changes in the market value. The EMIs are then adjust accordingly to make repayment easier.
Things to Remember When Taking a Mortgage Loan in India
Eligibility
When apply for mortgage loan, the first thing you need to do is check your eligibility. Evaluate your existing liabilities, source of income, and credit score before proceeding.
Legal Documents
Make sure you have all your documents in place before sending across the application. List of documents needed usually include govt. sanctioned ID and address proof, previous salary slips and bank account statements, property documents, income tax returns, etc.
Additional Charges and Fees
It is advisable to check with the lender if additional charges or fees, such as processing fees, legal fees, foreclosure charges or other penalty charges, are applicable on loan against property. Compare between multiple lenders and settle for one who offers zero to nominal charges to avoid paying extra.
Now that you know all about property loans and mortgage loan interest rate, get in touch with a reputable lender and apply online to get your loans approve and sanction faster than ever.
