Over the last few years, mortgage loans have become increasingly popular. This was not the case until a few years ago — people were highly sceptical about these loans since they involve pledging an immovable asset, mostly a residential or commercial property, as collateral. However, more and more people are opting for mortgage loans these days since borrowers now know that a mortgage loan is as safe as any other type of loan and easiest to pay off if planned well.
Before we tell you how to apply for a mortgage loan in India, let us first establish the basics of this popular financial tool.
Detailed Explained about Mortgage Loan-
A mortgage loan is a popular financing option under which a lender pledges an immovable asset as collateral. This immovable asset could be a residential or commercial property or even a piece of land. The borrower repays the loan in the form of EMIs, which constitute a principal component and an interest component.
The papers of the property stay with the lender until the borrower has repaid the loan in full. Though the lender does not get ownership rights, they can sell the property for recovery of loan money if the borrower fails to pay EMIs for a continuous time. However, even if such a situation arises that a borrower is unable to honour EMI commitments for a long span, the lender cannot sell the property without giving the borrower prior notice and ample time to arrange funds to save the property.
Mortgage loans offer several benefits. To start with, since online mortgage loans are secured loans, lenders offer these loans at highly competitive interest rates. Further, these loans are processed and disbursed quickly and come with a relatively long repayment tenor.
So, if you need money to finance an emergency, opting for a mortgage loan is one of the easiest ways to arrange money.
Types of Mortgage Loans-
There are three different types of mortgage loans. It is important to understand all three types to ensure you are choosing the right one for you.
Home Loans
These are the most popular type of mortgage loans. They are also the cheapest. A home loan is one of the easiest, safest, and quickest ways to arrange funds to facilitate the purchase of a home. In fact, even people who have ample funds to pay the cost of a home in one go prefer to take a home loan to facilitate the purchase of their home and keep their savings intact for a rainy day.
When a borrower takes a home loan to buy a property, the lender lends the borrower 80% to 90% of the property’s value as a loan. The borrower must arrange the remaining 10% to 20% of the money. The borrower pays off the loan in the form of EMIs. The papers of the property stay with the lender until the loan has been paid in its entirety. Once the loan is paid, the lender transfers the ownership of the property back to the borrower.
The important thing that borrowers must know is that when they take a home loan, they can use the funds availed of only to buy a home. The loan money cannot be used for any other purpose.
Commercial Property Loan
A commercial property loan is like a home loan with the only difference being that the money is available to buy a commercial property and cannot be used for any other purpose.
Loan Against Property
A loan against property is another popular type of mortgage loan. Under this offering, lenders offer a loan against a property. This property could both be commercial or residential. It can even be a piece of land. Loans against property interest rates are quite low — in fact, loans against property are the second cheapest loans after home loans. The biggest advantage of these types of loans is that one can use the money as one deems fit. The loan comes with no end-use restrictions — you can use the money to buy another house or a car, pay for your child’s education, etc.
Now that we have established the basics, let us look at the eligibility criteria and interest rates for mortgage loans.
Mortgage Loan Eligibility Criteria –
Different lenders have different eligibility requirements for mortgage loans. These are the general requirements that one must meet:
- The borrower must be a residing citizen of India between the age of 23 and 70. The age requirements vary from lender to lender. However, note that the maximum age is always the age considered at the time of loan maturity.
- The borrower must be the rightful owner of the property they wish to mortgage.
- Both salaried and self-employed applicants must be able to show a stable source of income as well as a decent amount of work experience.
Mortgage Loans Rates of Interest-
Different types of mortgage loans draw different interest rates in India. Home loans are the cheapest with interest rates varying between 8.2% and 13%. The mortgage loan Interest ranges between 9.5% and 14%. Commercial property loan interest rates vary between 9% and 11.5%. Whichever type of mortgage loan you are planning to take, make sure to try and get the lowest interest rate possible.
Mortgage Loans – How to Apply
Applying for a mortgage loan is easy. Follow these steps to apply for a mortgage loan.
- To start with, do your primary research and figure out the lender from whom you wish to borrow money.
- Once you have decided on the lender, go to their website and fill out the loan application form.
- In the form, you will have to disclose details, such as your name, address, phone number, income, etc. These details will help the lender create the right loan offer for you.
- You will also be required to share details of your employment type — whether salaried or self-employed as well as details of the type of loan you want.
- Submit the application form and someone from your lender’s team will call you and explain the rest of the steps of the process.
If you are uncomfortable making an application offline, you can walk into one of the branches of your chosen bank/NBFC and make an application in person.
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