The recent trend in the Indian financial market clearly indicates the growing popularity of mortgage loan among prospective borrowers when compared to other unsecured credit facilities. Due to multiple customer-friendly benefits, such as long tenor, low interest rates, tax exemptions, etc. borrowers choose this credit form in times of financial crisis.
Nevertheless, borrowers should know what mortgage loan process is before opting for this credit instrument.
What is a mortgage loan?
Mortgage loan or a loan against property is a credit facility where an individual can obtain a sizable loan amount by pledging their immovable asset as collateral. In case the borrower fails to pay off the loan amount within the given repayment tenor, the lending institution has the right to dispose of the mortgaged property and recover the unpaid dues.
Prospective borrowers can follow these steps to opt for a loan against property:
Step 1: Visit the official website of the preferred lending institution.
Step 2: Fill up the application form properly with all relevant personal, professional and property details
Step 3: Based on this application, the lending institution will determine loan eligibility, and decide whether to proceed with the application or not.
Step 4: After the approval of the application, representatives from the lending institution will contact applicants to complete the identity and document verification process.
Following successful verification, financial institutions will approve the loan application and disburse the loan amount as soon as possible.
Individuals should keep in mind that a credit score of 750 or above is considered as a good CIBIL score for loan against property. Other factors that affect the principal loan amount are as follows:
- Location of the property
- Amenities present
- Infrastructure of the property
- Connectivity to the main parts of the city
- Property type (residential or commercial)
- Property layout and size
Points to keep in mind while opting for a loan against property
Individuals should keep the following in mind when opting for a LAP:
- Principal amount
This is the maximum amount that an applicant borrows from a lender. This amount is determined as per the current market value of the mortgaged property. An individual can get as much as 75% of the property’s market value by opting for this credit facility.
- Interest rate
Usually, lending institutions in India offer loan against property at low interest rates. The rate decides a borrower’s monthly instalments and the total payable interest. This rate varies from lender to lender. Hence, borrowers should evaluate their mortgage loan EMIs before applying for it.
- Additional charges
Additional charges, such as processing fees, documentation charges, service costs, foreclosure and prepayment fees add up to the total loan amount. Therefore, one must check these charges and make an informed decision accordingly.
These factors of a mortgage loan remain unchanged irrespective of any sub-type of this credit product.
Benefits of a loan against property
Some of the beneficial aspects of a loan against property are as follows:
- The principal amount for a mortgage loan can go up to crores depending on the market rate of the property. Lending institutions evaluate the current market value of the mortgaged property based on the loan-to-value ratio. Further, one can use the loan against property calculator to find out the exact amount beforehand.
- One of the best advantages of this credit facility is that borrowers can use the loan amount to fund their personal or professional expenses without end-use restrictions or obligations.
- Further, one can choose a long mortgage loan tenor to repay the debt.
Apart from these, the availability of pre-approved offers speeds up the loan application procedure and facilitates prompt disbursal of the loan amount. It is applicable to other financial products like loan against property, home loan, etc. Borrowers can check their pre-approved offers by simply submitting their names and contact details in the lender’s portal.
Now that you know what mortgage loan process is and the benefits of this credit instrument, you can reap maximum advantage by following the points mentioned above. However, make sure to spend the borrowed amount prudently and keep your mortgaged property safe throughout the repayment tenor.
