Banks and non-banking financial companies (NBFCs) offer mortgage as debt tool. Such loans are borrowed against collateral and may be used to meet any kind of financial need.
Before mortgaging a property, it is important to understand what a mortgage loan is. It is also necessary to know the various types of mortgage, the process of applying for such a loan, the eligibility criteria, and documents required.
About mortgage loans
A mortgage loan is a type of finance provided against a property or real estate. It is a contract between two parties wherein the borrower receives cash up front against collateral and has to make regular repayments over the loan tenure. Collateral in a property mortgage loan generally includes a piece of flat, land or commercial spaces, among others.
Types of mortgage loans
There are various types of mortgage loans available in India. The following are six major categories of mortgage loans.
Individual or business mortgage loans
Individuals may obtain finance against property such as flats, apartments, or land. Business mortgage loans, on the other hand, may borrow loan on property, which includes business premises or commercial spaces as collateral.
Under a simple mortgage loan, the lender does not acquire ownership of the mortgaged property. However, in case the borrower fails to repay the loan amount, the lender has the authority to mortgage the land.
Under this arrangement, the lender and the borrower agree on a particular date for repayment. Failure to repay on the mentioned date results in the lender obtaining the rights to sell away the property.
In usufructuary loan against property mortgage, the lender gets possession of the property. In case the property is profitable, the lender receives the monetary gains until the entire loan is repaid.
Mortgage by deposit of title deeds
In this type of loan against property, the property is delivered to a creditor or agent with the intent of creating a security.
In reverse mortgage, the lender pays the mortgage money to the homeowner. This means that the home equity increases while the debt of the borrower decreases.
A loan against property is the best way to fund your personal or business needs. There are various NBFCs that allow borrowing up to 90% of the property’s market value. What’s more is that you may enjoy attractive loan against property interest rates, with borrowing amount in the range of INR 5 lakhs to INR 10 crore.
It is necessary to meet the loan against property eligibility criteria specified by the lender. Upon determining your eligibility, you may apply for loan against property. You may simply fill the online application form and interact with the assigned relationship manager. Once the property has been inspected, you may check the loan against property documents required. The amount will then be disbursed, and may be used to meet your financial needs.