Shweta is facing a serious financial emergency for which she requires a considerable amount of funds. All she has is her house, and she cannot sell it. Under such a circumstance, she can look for a loan against property. A loan against property implies mortgaging your apartment or home to acquire a substantial amount. One can continue to live in such a house even after availing a loan against property.
Before learning more about loan against property eligibility criteria, let’s look at some of its features.
The following are some of the key aspects to remember when looking for a loan against property:
You will need to furnish the following mortgage loan documents if you are a salaried employee:
Also Read: Mortgage Refinancing: How Does It Work?
If you own a business, submit the following loan against property documents:
Keep in mind that these are the basic documents necessary to avail of LAP. Based on loans against property eligibility criteria, some financial institutions may ask for additional paperwork.
Loan against property eligibility criteria tends to differ from one lender to another. However, the following are some of the basic requirements you must fulfil:
Lenders also specify an age group, and only those falling under this group can avail of such loans. Moreover, you should maintain a credit score of over 750 to maximise your chances of securing a loan against property. Keep in mind that along with meeting these requirements, you have to furnish the documents required for a property loan.
Also Read: Home Loan Tax Benefit Calculators
Here are some crucial factors that play a vital role in determining your eligibility for a loan against property:
Borrower’s age
Lenders prefer younger borrowers when it comes to such loans. An individual approaching the retirement age may find it difficult to secure such a form of credit.
CIBIL score
Scores lower than 700 can lead to loan rejections as it indicates a poor history of loan repayment. Higher scores not only lead to easier loan sanctions but also lead to additional benefits like lower interest rates.
Tenure
The tenure you choose while availing of such a loan is assessed by the loan provider. It determines whether the lender is confident in your ability to repay the loan.
Property documentation
Perhaps the most important part of the mortgage loan documents list is the property papers. Any irregularities in these documents can lead to the rejection of LAP applications.
Now that you know about loans against property eligibility criteria, here’s how to ensure that you qualify for such a credit:
Build your credit profile
Repay your existing dues on time to ensure a proper credit score. A score above 750 will assist you in availing of all types of loans.
Keep FOIR under 40%
Fixed Obligation to Income Ratio or FOIR is the proportion of monthly debt to monthly income. If this exceeds 40%, it signifies that more than 40% of your income goes toward clearing dues. Applying for a LAP at such a time could lead to rejection.
Choose longer tenure
You can choose to opt for a long tenure to keep your loan EMIs down. When EMIs are nominal, a lender becomes more confident that you will be able to clear your debt without delinquency.
Additionally, look for a lender with relaxed eligibility criteria. Navi offers a loan against the property of up to Rs. 5 crores with easy-to-meet eligibility criteria. The lender also offers up to 25 years to repay the loan amount.
A loan against property is a long-term credit, much like a home loan. You can opt for a tenure of up to 25 years for repaying this debt. Besides bearing the monthly EMIs, you can choose to prepay a lump-sum amount when you have excess funds available. This reduces the interest burden on the loan.
Assessing a loan against property eligibility criteria and necessary documents is crucial before availing of such a credit. Doing so can simplify the process of application while also maximising your chances of acquiring the advance.
Ans: Your property must have valid insurance when you want to avail a loan against it. Moreover, the insurance policy must stay in place for the entire tenure of this loan. You must submit documents related to this policy while availing of such a loan.
Ans: A loan against property is available for both sole ownership and co-owned houses. In the case of co-owned property, both owners would be named as applicants for the loan. Moreover, lenders will check the eligibility of both of these owners.
Ans: A mortgage is available on all of the following – self-occupied flats, apartments and houses, commercial properties, and plots of land. Commercial properties can include shops, offices, malls, and other such complexes. Ask your lender about other property types on which it accepts loans against property applications.
Ans: Loan against property applications involves a processing fee. The exact percentage of this fee can differ from one lending institution to another. Generally, this fee is 1% of your loan amount. For instance, if the loan principal is Rs. 10 lakh, the processing fee would be Rs. 10,000.
Ans: A loan against property foreclosure refers to repaying the outstanding dues through a lump-sum payment. This effectively closes your loan account before the tenure runs out, thereby saving you a sizable interest payment. To foreclose such loans, you must write an application to your lending institution expressing your intention.
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