What is a Mortgage Loan?
Mortgage loans are one of the most popular options when it comes to gathering contingency funds. These are secured loans taken against an immovable property or asset. You keep the asset as a collateral with the lender and avail of cash to meet your financial goals, and then pay off the amount over a flexible tenor.
Mortgage loans are categorized into the following types:
- A loan against property
- A loan against commercial property
- Home loans
While commercial property loans and home loans can only be availed of to purchase commercial space or a home, respectively, a loan against property comes with no end-use restrictions. You can use such a loan for home renovation, or to fund a wedding or higher education overseas.
Types of Loan Against Property Interest Rate
Most lenders offer two types of interest rates on mortgage loans – Fixed Rate of Interest and Floating Rate of Interest. Here’s a detailed analysis of the two:
Fixed Rate of Interest
This type of interest rate stays constant till the reset period. You can opt for such a rate over a shorter repayment tenor.
Floating Rate of Interest
Here, the interest rates fluctuate depending on the prevalent market trends. Such rates are often unpredictable. However, you can get a brief idea of the current rate on the lender’s website. These are subject to periodic changes. Some floating interest rates are linked to Marginal Cost Lending Rate or MCLR while others can be linked to several external or internal benchmarks.
How Does a Mortgage Loan Work?
The lender holds the mortgaged property until the entire loan amount is repaid. This repayment can be done in instalments through affordable, monthly EMIs. The repayment schedule is calculated based on amortization. The monthly instalment value is determined depending on the principal and rate of interest.
Initially, the interest component accounts for a larger portion of your EMIs as compared to the principal. However, as you continue through a prolonged repayment tenor, the principal component increases while the interest value decreases. Nevertheless, the EMI value remains the same throughout. Use the online mortgage loan EMI calculator to compute your monthly payable dues.
Top Features of a Loan Against Property
Listed below are some of the highlights of a property loan:
- High-value loans up to Rs.5 Crore or higher
- Longer, flexible loan tenor extending up to 18 to 20 years
- Competitive loan against property interest rate starting at 8.50%,
- Minimal, hassle-free documentation
- Quick approval and loan disbursal
On top of this, some lenders also offer add-on benefits, such as ‘Flexi Loan’ facility and ‘Balance Transfer’ facility to ensure smooth repayments. Browse through and compare different lenders’ websites to understand all the features before proceeding.
Mortgage Loans: Eligibility Criteria and Documentation
To avail of mortgage loan, you will need to meet the eligibility criteria set by the lender. These include the following parameters:
- Age: Must be between 33 years and 58 years of age
- Citizenship: Must be residing in India
- Employment: Must be working at an MNC, public or private sector company and must have a minimum 3 years of experience
Additionally, certain factors, like CIBIL score, credit history, monthly income, repayment capacity, etc., also determine your eligibility for such a loan. Make sure you fulfil the above standards to avoid getting your loan application rejected.
Here is a list of documents that you will need to keep handy before applying for the loan:
- Address proof
- PAN/Aadhaar card
- Income Tax Returns
- Last 3 months’ bank statements
- Recent salary slips
- Copy of documents of the pledged property
Applying for a Mortgage Loan: Step-by-step Guide
Borrowers can apply for a mortgage loan either offline by visiting the nearest branch, or online by visiting their chosen lender’s portal. The latter is a much easier, faster option since you can access the website anytime from anywhere.
To apply for a loan online, follow these steps:
- Fill in the application form with your personal and employment details – name, contact number, address, and employment type.
- Wait for the authorized representative to get in touch with you – it will take less than 24 hours.
- Get your loan approved within 48 hours.
- Submit all necessary documents to support your loan claim.
- Get the loan amount disbursed after quick verification.
Now that you know what is mortgage loan and are familiar with its various aspects, do some research and select a lender that has been in the market for years, and is best suited to seamlessly walk you through the whole procedure.