Loan Against Property Interest Rates: Check Eligibility
A loan against property (LAP) is a secured loan that you can avail of by pledging a property (flats, houses, apartments) as collateral. It allows borrowers to access funds for personal needs, sudden medical expenses or business purposes. In addition, these loans come with lower interest rates and longer tenures due to their secured nature. Different financial institutions have their own rates for this loan.
Read on to know the LAP interest rates and top 5 financial institutions that provide LAP and tips to get better interest rates for loans against property.
Loan Against Property Interest Rates
Financial institutions offer borrowers the option of fixed and floating interest rates on their LAP.
Fixed interests remain fixed for the entire loan tenure and are not affected by market fluctuations. In most cases, they are 1-2% higher than floating interest rates. Floating interest rates change at regular intervals with changes in external benchmark rates.
The choice of fixed vs floating interest rates depend on the market trends and security. Fixed rates offer certainty when there is a chance of increasing market lending rates. In contrast, floating interest rates lead to more savings when the market lending rates decrease.
Here is a tabular representation of loan against property interest rates offered by top financial institutions in 2022.
Best 5 Financial Institutions that Provide Loan Against Property
| S No. | Name of the Financial Institution | Interest Rates Starting At |
| 1. | Kotak Mahindra Bank | 9.25% p.a. |
| 2. | Axis Bank | 8.90% p.a. |
| 3. | HDFC Bank | 8.75% p.a. |
| 4. | ICICI Bank | 8.35% p.a. |
| 5. | Navi | 8.74% p.a. |
What Factors Affect Loan Against Property Interest Rates?
Financial institutions do not offer the same LAP rates for all borrowers. Instead, it varies depending on the following key factors:
- Credit Score: A high credit score indicates that a loan applicant has responsible financial behaviour. This works in your favour as it makes lending institutions willing to offer a higher loan amount and better interest rates.
- Age: Your age plays an important role in deciding if your loan application will be accepted. A young applicant has a much higher chance of repaying their loan, so they get lower interest rates. On the other hand, the older you are, the higher will be the interest rates that the lender levies on you.
- Property Details: The age, condition and location of the property to be mortgaged decide the interest rates. Residential properties are deemed to be more valuable than commercial properties. Similarly, a property in pristine condition located in an expensive neighbourhood with all amenities will fetch the best loan against property interest slabs and rates.
- Borrower’s Income: A loan applicant must have a regular and steady source of income, enough to cover their EMI payments. Financial institutions check your income, debt-to-income ratio, employer’s reputation (for salaried applicants) and years left till retirement.
Tips for Better Rates on Loan Against Property
- Maintain a good CIBIL score to improve your chance of loan approval and for lower interest rates.
- Financial institutions consider your monthly income as one of the most important factors to determine your repayment capacity. Therefore, you should make sure that the EMI amount is not over half of your monthly income.
- Before taking a loan, do your due diligence by comparing the interest rates of different lenders. You will also want to check their additional charges and fees.
- Do not over-leverage your assets to get the highest loan amount. Having enough finances to reduce the risks of losing your assets is also a good idea.
- Check that you have all the property documents to establish your ownership. Once the lender receives all proper documentation, it can verify the correct market value of the property.
Navi offers home loan at interest rates starting from 7.39% p.a. It offers loans of up to Rs.5 crore with a tenure of up to 30 years. Besides the interest, the following additional charges and fees are also applicable.
| Fee Chargeable | Amount |
| Processing Fees | Up to 2% of the loan amount |
| Legal and Valuation Charges | Rs. 5000 |
| Prepayment charges (floating rates) | Nil |
| Prepayment charges (fixed rates and for business purposes) | 2% of the amount pre-paid |
| Foreclosure charges (floating rates) | Nil |
| Foreclosure charges (fixed rates and for business purposes) | 2% of the amount pre-paid |
Final Word
A loan against property is an ideal solution for those willing to put their properties as collateral to get funds for immediate needs. You can apply for this loan to address medical emergencies, meet cash flow needs of your business or fund your child’s education. Due to their secured nature, loan against property interest slabs and rates is relatively lower. Moreover, they are quite easy to get and allow you to use your property as per your needs.
FAQs
Ans: The amortisation schedule for a LAP gives a detailed breakdown of your monthly EMI, including the principal and interest component of each instalment. Initially, the EMI contains a higher interest component, and with each repayment, it decreases as the principal repayment increases.
Ans: Different financial institutions have their own eligibility criteria for LAP. Here are some standard eligibility criteria:
• Age: 21 to 65 years
• Employment: Salaried/self-employed
• Nationality: Residing Indian citizen
• Income: Regular and steady income
• Maximum loan amount: 50-60% of the property value
Ans: Most financial institutions require the following documents for LAP:
• Proof of identity and address: Voter ID card, Aadhaar card, PAN card etc.
• Property documents: Title deed, proof of no encumbrance, approved plans etc.
• Employee ID card
• Latest salary slip
• Bank account statement of previous 3 months
• Income Tax Returns
Ans: Having an insurance policy for a loan against property is recommended as it will safeguard your financial interest. It lowers the risks of default and covers loan repayment in case of any unfortunate event of death or disability.
Ans: The loan-to-value (LTV) ratio is the percentage of the property’s current valuation set as a maximum cap for a loan. LTV for a loan against property can be up to 80% of the property’s value depending on the financial institution, borrower’s profile and property value.
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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