Mortgage Loan/Loan Against Property: Eligibility, Interest Rates & 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.

Read on to know more!

Also Read – Home loan Insurance

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 6.46%
HDFC Bank	Starting at 8.00%
State Bank of India	Starting at 8.80%
Citi Bank	Starting at 6.90%
Axis Bank	Starting at 11.00%
Tata Capital	Starting at 10.10%
Kotak Mahindra Bank	Starting at 9.25%
ICICI Bank	Starting at 8.35%
IDFC Bank	Starting at 7.50%

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%

Please note that these fees and charges may vary from lender to lender and change over time.

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:

1. 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.
2. 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.
3. You may face rejection if your property papers are not clear or if there is a dispute on your property. 
4. Remember that the LTV ratio for most financial institutions is usually restricted to 50-60%. 

Also Read: Benefits of NBFC Home loans

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:

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

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:

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.

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.

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. 

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. 

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