Personal Loans are usually of two types i.e. secured personal loan which is secured against the mortgage of immovable property, insurance policies, gold jewelry, investments, etc and another is unsecured personal loan which does not require you to pledge anything.
Mortgage Loan commonly known as “Loan Against Property” in India is a secured loan that is sanctioned against fully constructed, freehold residential and commercial properties.
Some of the key factors are given below for your consideration before you apply for Loan Against Property.
Loan against Property is normally taken for funding various personal or business needs of an individual e.g.
· Business Expansion
· Education Expenses of children
· Marriage expenses in the family
· Purchase of home
· Improvement or Extension of existing Property
· Medical Treatment
· or Any other personal Need.
The applicant for the loan should be:-
· Minimum 21 years of age
· Salaried Individual
· Self Employed professionals / non-professionals
Applicant should be the owner of the property and all co-owner has to compulsorily be co-applicant to the loan, however the co-borrowers need not be the co-owner to the loan.
Typically you can get up to 50% – 60% of the value of the property or twice your annual income (whichever is lower) as a loan against property. The maximum loan amount is normally between Rs. 5 – 10 crores, but can be extended in some cases depending on the borrowers profile
The final loan amount is dependent on host of other factors like income and regular outgoings, existing loans, repayment track record, valuation of the property by the lender, etc.
Rate of Interest
Loan against Property is normally available on Floating as well as Fixed rate of interest. Most of the lenders will offer fixed rate of interest with a reset clause of 2-5 years which means that your fixed interest rate will be reviewed every 2-5 years and can be increased or decreased as per the terms and conditions mentioned in the agreement.
Most lenders offers maximum tenure of 15 years but it is also restricted by the borrower’s age at the end of the tenure so as to ensure that the loan repayment ends on or before the retirement age of the borrower which is usually 60 years for salaried and 65 years for self employed borrowers.
Fees and Charges
The processing fee for loan against property may vary from lender to lender but is usually up to 2% (excluding service tax) of loan amount.
The loan can be foreclosed any time on the payment of applicable penalty, however if the loan is taken on floating rate from the BANK then the borrower need not have to pay any foreclosure charges as the RBI has issued notification banning penalty of prepayment of all floating rate loans.
To start the loan process, the lender will require proof of:-
· Property Documents including Title Deeds, chain of documents (if resale) and no-encumbrance certificate
One thing that needs to be noted is that if you are planning to buy a residential property, then it is advisable to take a Home Loan as they are cheaper, available for a longer tenure up to 30 years and lenders finance up to 90% of agreement value of the property as home loan as compared to Loan Against Property..
In case you are unable to get home loan due to any reason then you can take the loan against property.