Indian mortgage industry is poised for a higher growth and is expected to grow five-fold in the next 10 years. As per LIVEMINT, the mortgage market is worth Rs.12 trillion and its market has been growing at a fairly robust pace over the past decade.
Loan against property is one of the best loan modules which help the customers to capitalize the financial value of their property. The borrower can use the loan for meeting his personal needs, funding children’s higher education, for business startup or business expansion.
The term Mortgage Loan or LAP is used interchangeably for a loan against property frequently in the finance industry.
Key Factors That Affect Loan against Property
1. INSURANCE : Mortgage insurance lowers the risk for both lender and borrowers. The fund provider feels more confident while extending credit, when a customer is ready to avail insurance. We advise you to take an insurance cover as it will lessen the burden on your family under unfortunate circumstances.
2. TENURE : A longer tenure helps a borrower to increase the eligibility of the loan. Inversely speaking, a shorter tenure will help you to save a lot of money on the interest part.
Your age also plays an important part in deciding tenure of the loan. If the borrower’s age is on the lower side, then earning co-applicant is taken. On the other hand, if borrower’s age is on the higher side, then lender offers a term, which will end up before his/her retirement.
3. COMPARE DEALS : Getting a LAP is no more a tough task if you meet all credit parameters. But the main concern among customers is to decide whether to choose a bank, NBFC or any other alternate source for the loan. Either you can physically visit these financial institutions or search online. Post this, you can compare all available options & choose the best deal for yourself which suits your needs.
4. AGE OF PROPERTY : Suppose, if the age of your property is of 10 years, and as per credit policy of lender, the maximum age limit of the property allowed is 20 years. Then, the loan tenure cannot
exceed 10 years.
If your building is old, but you have made renovations recently then it will have a positive impact on your loan application.
5. PATTA CASES : Some property owners have only the patta and do not have other relevant approvals or title deeds. In these types of cases, a loan application is rejected without much of a
6. INADEQUATE ITR’S : If you are self employed, then usually lender will ask for recent 3 years Income Tax Returns (ITR’s). Suppose, you have filed only 1 or 2 IT returns. But you can show supporting bank statements & other relevant documents, which will prove your regular flow of income, and then it is sometimes it is considered by certain lenders.
7. REGULAR FLOW OF INCOME : The loan applicant should have a regular source of income. It helps to ensure that EMI will be paid consistently. So, the lender does not have to worry about the stage of default. The process of recovering of money from selling the pledged property is actually very rigorous & exhaustive one.
8. TYPE OF CHARGES : Apart from regular interest rates, there are other types of charges borne by the customer such as loan processing fee, renewal charges, pre closure charges, sales tax, etc. You must add these charges, before arriving at the final decision of availing the loan.
9. CO-APPLICANT : All the co-owners of property are supposed to give their consents before a loan application. A co-applicant can be your spouse, parents or children. If you don’t have a decent credit score, then it is better to apply with a co-applicant.
10. INTEREST RATES : You have to choose between fixed v/s adjustable interest rate. Fixed interest rate stays fixed throughout the tenure of the loan. The general rate lies between 10 to15% p.a. Adjusted rate varies with a change in market setting. This option could be beneficial for those who opt for a short tenure.
11. PERPETUITY ISSUE : For an example, take a property, whose value is Rs 10 lakhs. A borrower can raise Rs.6 lakhs today. (Assumption: Maximum 60% allowed of total property amount). After few months when the property price goes up to Rs.11 lakhs, then he will be eligible to raise Rs.6.6 lakhs and pay off the first lender. The cycle is repeated until the property prices actually crash down. In case of default, the exit will become very tough for the lenders.
A loan against property is one of the best ways to arrange big fat loans for you. Even If your age is on higher side & you are not meeting the eligibility criteria, then you can get a reverse mortgage loan for yourself.
We hope that this article will help all potential loans against property customers. If you still have any query, then please feel free to contact us at +91 95120 15768 or send an e-mail at email@example.com