Key Benefits of Mortgage Loan
Among the different loan products offered by lenders, loan against property is a popular choice. Here, in this post find out all you need to know about this loan product – what it is, benefits, features, and more.
What is Mortgage Loan?
As the term implies, here a borrower pledges a property to avail funding from the lender. The loan amount you can secure here depends on the market value of the property you are pledging. Most lenders offer up to 50 to 60% of the current market value of the property as the loan amount. This is a secured loan, and the property you are pledging at the bank acts as collateral. In case, you fail to repay the loan, the lender can auction your property to recover the funds you own the lender.
Unlike home loans where the usage of the loan amount is restricted, mortgage loan offers the flexibility of usage of the funding you receive. You can use the loan amount for any purposes – whether expanding your business, funding a medical emergency, for the higher education of your child, or for funding your dream vacation, the usage of funds is all up to you.
Benefits of Availing a Mortgage Loan
- Lower interest rates – Since this is a secured loan, the rate of interest is generally lower when compared to other unsecured loans like a personal loan. Make sure to compare the interest rates offered by different lenders and pick the lender who offers you the best deal.
- Minimal to Zero Prepayment Charges – One of the biggest benefits of availing a loan against property is that you can foreclose the loan without any penalties. Most lenders don’t charge any prepayment charges for a loan against property.
- Easy Eligibility – Since this is a secured loan with collateral, most lenders including traditional banks are willing to offer loan against property, thereby making it easier to secure the funding compared to other common loan products.
- Long Tenure – Just like home loans, a loan against property has a long tenure, generally up to a maximum of 15 years. This is quite a long period, compared to personal loans that have very short tenures.
- Low EMI – When the tenure increases, the EMI decreases and vice versa. If you are on a tight monthly budget and cannot afford to pay high EMIs, then a loan against property is an excellent choice for you. However, keep in mind that the longer the tenure you choose, the higher is your interest burden. So, instead of choosing the smallest EMI, choose an EMI that you can comfortably pay without straining your finances.
What Property can you Mortgage under the Loan against Property?
A mortgage is nothing but the process of submitting a property you own as collateral to avail loan funding. When availing a loan against property, also known as mortgage loans, you can submit a self-occupied house, commercial property, rented residential property or a plot that you own as collateral.
However, keep in mind that the lender scrutinises the property you have submitted for a mortgage before providing you with the loan amount. So, make sure to choose a property that is free from all litigations and with clear ownership records.
What is the Sanctioned Loan Amount under a Loan against Property?
The sanctioned loan amount depends on several factors like market value of the property, borrower’s age, income, credit scores, spouse’s income levels, etc. Generally, most lenders offer a loan amount up to 50 to 60% of the property’s market value.
Now, that you are aware of all the features and benefits of a loan against property, you can consider this loan product the next time you require funds, provided it meets all your financial requirements.