Property, especially house and land, is precious for two reasons – it provides you with a place to live and fetches money when you need it urgently. If you have a property, you can avoid paying sky-high interest on personal loans and choose a loan against property.
1. Loan Amount
A loan against property, also known as a mortgage loan, is a versatile loan that lets you encash your property while retaining your authority over it. You can apply for a loan against the property if you have freehold residential or commercial property ownership rights. You can also apply for a mortgage loan if you own a plot of land. Loan against property interest rates is usually lower than personal loans. If you have never applied for a loan against property, here are the five things you must consider before applying for one.
The loan amount is the most vital factor you need to consider while availing of a loan against property. The loan amount determines the loan against property interest rates and approval. For instance, if the loan amount is higher than your repayment capability, the lender might not approve the loan. Also, property value plays a crucial role, as it directly affects the loan amount you can obtain based on the provisions of the Transfer of Property Act.
Indian lenders generally approve a loan amount of up to 60% of the property’s market value. Hence, if your property value is INR 1 crore, you may avail a loan amount of up to INR 60 lakh. The lender will send a valuer to analyze the property value and the borrower’s repayment capability to determine the loan amount. Besides property value and the repayment capability, the lender may also factor in the borrower’s age, qualification, and occupation.
Moreover, if you apply for a loan against property with a joint applicant, the loan amount might be higher.
2. Interest Rate
Loan against property interest rates depend on various factors, including but not limited to the borrower’s credit score, age, net income, the nature of income, and the property valuation. A credit score of 750 and above is considered a decent score and a bare minimum necessity for getting the lowest rates. Moreover, if your income is beyond the threshold set by the lender, you may get attractive interest rates.
3. Documents Required
The documents required for loan against property approval include the borrower’s identity, age, and address proof. You will also need to submit your income and bank statement documents. Moreover, the lender will ask you to furnish property documents, including title deed, No-Objection Certificate, and other property papers. To expedite the loan approval, you must keep the documents in proper order and check whether anything is missing or not.
4. Application Process
You can apply for a mortgage loan in two broad ways – online and offline. The offline mode is more time-consuming than the online mode. In the online mode, you can conveniently place a loan request on the lender’s website. You may have to upload the documents online and wait for the lender’s call. After the lender confirms your loan-against-property eligibility and interest rates, they will schedule an in-person property and document verification. After the verification is done, you will get the loan amount directly in your bank account.
5. Lender’s Reputation
When applying for a loan against property, don’t get carried away by ultra-low interest rates. While the rates you see online are usually lower than the rates offered by offline lenders, they might not speak the ultimate truth. Some lenders display insane rates to catch borrowers’ attention but often charge a higher processing fee and preclosure charges, increasing the net loan cost. Fortunately, reputed Indian lenders display all charges on their websites. You can check the charges before availing of the loan.
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Conclusion
While applying for a loan against property, you must move beyond the interest rates and watch the other associated fees. Choosing the best lender can often differentiate between an excellent and an unsatisfactory loan against property.
