Mortgage and Loan against property- Overview

 

mortgageA loan against property (LAP) is a loan that is provided against the mortgage of property. The loan is usually provided as a certain percentage of the property’s current market value, which varies around 40 per cent to 80 per cent. Residential property (Self occupied or vacant), commercial property (Offices, Shops etc.), industrial property (occupied) and also alternate properties (Schools, Hospitals, Hotels etc) can be considered as collaterals  for loan against property. Loan against property is the secured loan, where the borrower gives a guarantee by using his property as security. Since this is a secured loan, you can get a higher amount than the one you will get for an unsecured loan like a personal loan at much better interest rates and tenure.

Different lending institutions use different criteria for lending but generally, lending institutions looks into the applicant’s’ repayment capacity and the current market value of property while deciding on the loan eligibility. Current market value of property is based on technical valuation report provided by valuation experts. Repayment capacity of the applicant is based on factors such as applicant and co-applicant’s current income, age, number of dependents, financial statements, banking habits, loan repayment history and business/employment stability.

Usually, Loan against Property has a maximum tenure of 15 years, subject to the condition that it does not exceed retirement age for salaried individuals or 65 years for self employed. This condition however can be flexible in certain cases. You repay the loan in Equated Monthly Installments (EMIs) comprising principal and interest. Usually, Repayment starts from the next month in which you take full disbursement.

The interest rate offered can be floating or fixed, which varies from 12-16%.This interest rate is cheaper than personal loan. Loan against Property is considered to be a better option since the tenure for these loans is longer than those for personal loans, which offer a maximum tenure of five years. You can also prepay the loan, with the banks following the same guidelines as those for regular home loans. Banks don’t charge any prepayment fee for floating rate loans. One has to pay the administrative and processing fee, which is generally around  0.5-1.5% of the value of the loan.

Usually all lending institutions ask for co-applicant for loan application. Lending Institutions follows following criteria for selection of co-applicant in loan application –

Ownership Income Aggregation Result
Husband Wife Yes
Wife Husband Yes
Father/Mother Son Yes, if sole child
Son Father/Mother No
Father + Son Father/Son/Both Yes
Father/Mother Daughter No
Daughter Father/Mother No
Brother/Sister Brother/Sister No
Mother + Son Mother/Son/Both Yes
Brother 1 Brother 2 No
Brother 2 Brother1 No
Brother 1 + Brother 2 Brother1 + Brother 2 Yes, if separable units
Individual(s) Company No
All partners are owner of property Partnership Firm Yes

Loan application at lending institution for Loan against Property is a well documented process and it requires following list of documents –

table

Customers

A loan against property is one of the easiest ways to raise money. The advantages of this loan are manifold like low interest rates and longer tenure compared to personal loan. The only disadvantage of such a loan is that if the borrower is not able to pay the loan completely, the bank or the financial institution has full rights to take the mortgaged property.

If you have a requirement for Loan against Property. We at LoanKuber can assist you in getting your dream fulfilled of getting a Loan against Property at competitive rates and tenure.