Mortgage Loan/Loan Against Property: Eligibility, Interest Rates and Things to Consider
A mortgage loan is a secured financing option sanctioned against a property kept as collateral. Also known as a loan against property, this mode of financing provides you access to immediate funds with no end-use restrictions at lower interest rates and longer repayment tenures.
The following sections will cover interest rates, charges, eligibility criteria, and features/benefits of these loans.
Mortgage Loan Interest Rates
Here is a tabular representation of the loan against property interest rates across different banks and financial institutions:
| Name of the Financial Institution | Interest Rate (p.a.) |
| Navi | Starting at 8.39% |
| HDFC Bank | Starting at 8.00% |
| State Bank of India | Starting at 9.30% |
| Citi Bank | Starting at 7.15% |
| Axis Bank | Starting at 8.90% |
| Tata Capital | Starting at 10.50% |
| Kotak Mahindra Bank | Starting at 9.25% |
| ICICI Bank | Starting at 8.35% |
| Bank of Baroda | Starting at 9.15% |
Mortgage Loan Fees and Charges
Follow the table below to know more about loans against residential property fees and charges:
| Type of Fee | Applicable Charges |
| Processing fee | Around 1-3% of the loan amount |
| Penal interest | Around 2% for unpaid EMIs |
| Pre-closure charges | Around 0-4% |
What Are the Eligibility Criteria for a Mortgage Loan?
Although mortgage loan eligibility is not the same for all lenders, the basic parameters that most financial institutions consider before approving loan applications are:
- Borrower’s debt-to-income ratio
- FOIR (Fixed Obligations to Income Ratio)
- The property’s market value
- Age of the borrower
- Employment status of the borrower
- The borrower’s credit/CIBIL score
For a mortgage loan, lenders prefer that the borrower pay off the loan while still employed. As a result, the maximum age limit for salaried individuals is 60 years, and for self-employed individuals, it’s 70 years.
Things to Consider Before Applying for a Mortgage Loan
Consider the below points before you apply for a loan against property:
- Before approving a loan application, lenders usually track borrowers’ payment records and repayment capacity. So, if you have existing liabilities or other loans, it may lower your eligibility. Regarding this, some financial institutions also consider the number of dependents in a family to assess the repayment capacity.
- Mortgage loans are high-value loans and have longer tenures. Hence, you must conduct proper market research and compare various lenders before deciding. While comparing lenders, do not limit your research to the interest rate. Instead, consider other parameters such as processing fee, foreclosure charges, late payment penalty, loan to value ratio, and more.
- You may face rejection if your property papers are not clear or if there is a dispute on your property.
- Remember that the LTV ratio for most financial institutions is usually restricted to 50-60%.
You must also note that LAP does not provide any tax benefit. However, you can claim tax deductions if you utilise the funds for business purposes. If that is the case, you will be able to claim the benefits against interest paid and additional fees and charges.
What Are the Documents Required to Apply for a Mortgage Loan?
Here is the set of necessary documents that self-employed and salaried individuals need to submit when applying for a loan against property:
1. For Salaried Individuals:
- Last 6 months’ salary slips
- Previous 3 months’ bank account statements
- Aadhaar card
- PAN card
- Proof of address
- Property documents
- IT returns
2. For Self-employed Individuals:
- Previous 6 months’ bank account statements
- Aadhaar card
- PAN card
- Proof of address
- Property documents
Note that these documents are indicative, and you may be asked to submit additional documents if the need arises.
How to Apply for a Mortgage Loan?
Here are the steps to apply for a mortgage loan:
- Step 1: Go to the website of your preferred lender and fill out the online application form.
- Step 2: Enter your property and personal details.
- Step 3: Enter your income and financial data to know the loan offer.
- Step 4: Submit the application.
Upon following these steps, a representative will get in touch with your regarding the document submission and further processing.
Features and Benefits of a Mortgage Loan
Here are the various features and benefits that a mortgage loan brings along:
1. Obtain Financing at a Lower Interest Rate
Since a LAP is secured financing, lenders usually charge a lower interest rate since there are negligible risk factors. So, you can meet all your personal or professional monetary requirements with this affordable loan option.
2. Continued Ownership of Property
When availing of a LAP, you do not lose your ownership status on your property. You can continue to use your property. In addition, you can mortgage different property types, such as commercial or residential.
3. Longer Repayment Tenure
The maximum tenure under a loan against property is generally longer. It makes a mortgage loan a lucrative option, as its extended repayment tenure leads to lower EMIs.
4. Substantial Loan Amount
Lenders usually provide financing of up to 60-70% of your property’s market value, which you can use to meet all your big-ticket financial obligations.
Download the Navi app to obtain home loans and loans against property at competitive interest rates and easy to meet eligibility.
Final Word
A mortgage loan is one of the best ways to address emergency cash crunches. From higher education, an extravagant vacation or a dream wedding, a loan against property is ideal for addressing various monetary requirements. Furthermore, its easy-to-meet eligibility parameters make the entire borrowing procedure hassle-free.
FAQs
Ans: Yes, you can choose to foreclose your loan account. However, you must note that certain financial institutions charge a fee for the pre-closure of a mortgage loan. So, ensure that you are aware of the charges before proceeding.
Ans: No, financial institutions provide a loan amount of around 50-60% of the price of your property. This is called the loan to value ratio (LTV ratio) and varies from lender to lender. So, compare different lenders and choose the one after considering the LTV ratio.
Ans: Yes, the property you will be keeping as collateral needs to be insured. You will have to provide proper insurance documents that insure your property against any calamities. Only after careful assessment will the lender approve your loan application.
Ans: Yes, you can. In this case, all the co-owners of the property will be treated as the co-borrowers. This will also increase your loan eligibility and allow you to negotiate for better and more affordable terms.
Ans: You need to mortgage a residential or commercial property. In addition, you must ensure that your property is clear and free from any litigation and does not have any existing mortgage or loan. You also need to keep all the property documents handy before applying.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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