Financial crunches can derail your planning and leave you in a soup. However, if you have a property to mortgage, arranging for funds becomes quite easy.
What do you mean by a loan on a mortgage?
A loan on a mortgage of a property comes under secured loans and hence it carries a reasonable rate of interest, as against unsecured personal loans, and the repayment tenure is longer too. The loan amount in a mortgage loan, or loan against property, is disbursed against the guarantee or security of the borrower’s legally owned property.
Who can opt for a mortgage loan?
Depending upon the profile of the borrower, there are different kinds of mortgage loans that can be opted for. The mortgage can be created over a piece of land, a house, or flat, or any other piece of property. The security over property can fetch them a huge lump sum as a loan. They usually carry smaller EMI and can be paid over a longer period of time. A loan on mortgage is one of the most lucrative options for borrowers, with attractive interest rates.
Usage of amount taken on mortgage loan
Banks and other NBFCs do not specify the end use of the money advanced against the security of the property. The borrower can put it to use as per their requirement and need, be it a personal emergency or business-related financial crisis. Self-employed, business-owners and professionals, all are eligible to opt for a mortgage loan.
Types of mortgages
The two most common types of loan on mortgage prevalent in India are:
- Registered mortgage
- Deposit of title deeds
Registered mortgage– In a registered mortgage loan, the security provider signs the deed and the bank is usually registered with the sub-registrar of assurances within whose jurisdiction the mortgaged property is located. If the borrower defaults in the repayment of the loan, the bank has the power to sell off the mortgaged property without involving the court in the process. Hence, a registered mortgage is always the preferred choice for the banks.
Deposit of title deeds– There is another way of mortgage creation which involves the deposit of title deeds in relation to the property being mortgaged. These land documents are handed over to the bank, or an agent of the bank, and the mortgage is created by recording the delivery of these documents.
Documents required for a mortgage-backed loan
In comparison to a commercial loan, a loan on mortgage has a much simpler application process. The borrower needs to fulfil and provide the following essential documents:
- Duly filled in loan application form
- Income proof
- Proof of address and identity
- Documents supporting the ownership of the property to be mortgaged
- Property valuation report
Mortgage loan rates
Mortgage loan rates on property vary from lender to lender, and they generally range between 9% to 15% per annum. The tenure of the loan stands anywhere between 7 to 15 years. The borrower has the option to choose between a lump sum payment or an overdraft facility for the amount of loan extended. Financial institutions and banks, like PNB Housing Finance Ltd, have an online LAP eligibility calculator through which they can calculate the exact amount of EMI to be paid, depending upon the loan repayment schedule opted for.
Even though loan on mortgage is one of the safest options to meet cash contingencies, inability to repay the same on time can adversely affect the borrower in more ways than one. Hence, one should weigh all permutation combinations, and assess their repayment capabilities before opting for a kind of loan against their property.