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Five things you need to know about Loan against Property

Author: Litty Jose
by Litty Jose
Posted: Apr 21, 2017
against property

It’s an age old, time test practice to take out a loan against property. Property is said to be the best investment and people have often use their own homes as guarantees or as a mortgage. Loan against property is preferred by many because this way you can get a higher loan amount with the benefit of lower EMI.

Recently, Crisil said in a note that the amount of loans taken against property is set to double to Rs.5 trillion by 2019 and it is expected that the number will grow by 22% annually in the next four years. There are also emerging signs of a build-up in risk as competition intensifies, Crisil noted.

Creating a business module comes with pre requisites and having to understand what kind of loan is best suited for your needs is equally important. Hence, if you want to expand your business or want to buy a new property and are considering taking a mortgage loan then here are five things you need to know about it.

1. Loan against property can get you a higher loan amount for your business or personal needs with the benefit of lower EMI. With easy documentation, speedy approvals and flexible repayment options, getting a loan is easier than any other time of loan.

  1. Loans can be applied for by individuals, either solely or jointly. Owners of the current property, in respect of which the loan is being sought, will have to be co-applicants. However, the co-applicants need not be co-owners.
  2. To check your loan against property eligibility the lender will check the market value of your property. Banks and NBFCs give only a percentage of the market value as loan.
  3. Since a mortgage loan is a secured loan it is cheaper than personal loan. Mortgage loan interest rates are way lesser than those of personal loans. Today interest rates for personal loans can range from 12.5% to 21% whereas those for mortgage loans are between 12% to 15%.
  4. The processing charge for this type of loan is 0.50% to 3% of the loan amount plus service tax. Service tax is currently 14% of the amount. The processing fee is usually deducted from the loan amount sanctioned to you.

These pointers offer a basic insight into mortgage loans. However, it is always advised to consult a financial advisor or bank or finance company before opting for any kinds of loans.

About the Author

I'm a financial advisor with an experience of more than 5 years in Housing Finance Companies. I have worked for topmost financial firms in India.

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Author: Litty Jose

Litty Jose

Member since: Aug 02, 2016
Published articles: 18

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