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Most banks, financial institutions, and housing finance companies provide home equity loans, also known as mortgages. This type of loan is a secured loan because the loan will be granted against a residential or commercial property owned by the borrower. After the sanction of the loan, the borrower can use the loan amount to serve the purpose for which the loan was requested.

Usually, according to the standards, the maximum loan amount given under the mortgage loan in India can reach 70% of the total property value. This type of loan is profitable and is reasonably convenient to obtain from banks or financial institutions. The repayment from the borrower is easy due to the low mortgage interest rates.

All about the loan for property

All about the loan for property

Let’s understand briefly about Loan against the property and other details associated with it.

What is the loan against the property?

What is the loan against the property?

A loan against a property or a mortgage is a kind of debt obtained on the security of a specified property, which the borrower is obligated to repay within a predetermined time period at specified interest rates.

The borrower can qualify for a loan of up to Rs 25 crore based on the value of the property up to a term of 20 years in case of loan against the property.

Features of the loan against property

Features of the loan against property

  • This loan is granted against properties which can be either an independent house, an apartment or an apartment.
  • The loan is also given against a mortgage on commercial properties such as stores, shopping malls, shopping complex, office building, etc.
  • This loan can also be used against leased residential properties.
  • The loan can be requested by employees as well as by the self-employed.
  • The mortgage is even granted on land belonging to the borrower.
  • Interest paid on a home loan is eligible for tax benefits under Section 37 (1) of the Income Tax Act 1961.
  • The interest paid on the loan provides tax benefits under Section 24 of the Income Tax Act and can be used up to Rs 2,000,000.
  • The mortgage comes with a flexible repayment period.
  • The interest rates on this loan are low compared to the personal loan which is why most of the home buyers opt for this loan over the personal loan.
  • The interest rates on this loan are available in two types – fixed and floating. In the case of fixed interest rates, the rates will remain firm for the duration of the loan. In the case of variable interest rates, the rates are subject to change during the term of the loan.
Eligibility criteria for a mortgage

Eligibility criteria for a mortgage

  • The applicant must be an Indian citizen.
  • The minimum age of the applicant must be at least 21 years old at the time of submission of the application.
  • The applicant must have a good credit rating.
  • The applicant must have a regular source of income. They must be employed or self-employed and must have a certain number of years of experience in a job or in running a business, to secure the loan.
List of documents for loan against property

List of documents for loan against property

In the case of salaried employees

  • Last payslip for the last 3 months.
  • Title Property documents.
  • Recent details of Form 16 and tax returns.
  • Proof of Identity – PAN Card, Aadhaar Card, Passport, Driver’s License, Voter ID Card, Employee ID Card.
  • Proof of Residential Address – Utility bills (water, electricity), tax receipt bill, passport, Aadhaar card, voter ID card.
  • Bank salary credit statement for the last 6 months.
  • Bank statement of the salary account for the last 3 months.
  • Passport-size photographs.
List of documents for loan against property

List of documents for loan against property

In case of self-employed

  • Proof of office address.
  • Recent photographs in passport format.
  • Title Property documents.
  • Proof of Identity – PAN Card, Aadhaar Card, Passport, Driver’s License, Voter ID Card, Employee ID Card.
  • Proof of Residential Address – Utility bills (water, electricity), tax receipt bill, passport, Aadhaar card, voter ID card.
  • Certificate of educational qualification.
  • Proof of Self-Employed Income – Recent 6 month bank statement, audited financial report for the past three years.
  • Proof of Activity – GST Registration Certificate, Certificate of Practice, Shop Act License, Deed of Partnership, Certificate of Qualification, MOA and AOA.
  • Details of income tax returns for the past 3 years.
Prepayment of the loan against the property

Prepayment of the loan against the property

The home loan comes with an attractive prepayment option (partial payment) which gives the borrower the option of repaying part of the loan amount over the life of the loan (higher than regular IMEs in a lump sum).

As per RBI guidelines, for individual borrowers who have been granted a floating interest rate loan, no prepayment charge should be charged. But for businesses, prepayment charges are still levied but are minimal.

The loan prepayment option helps reduce the total principal amount outstanding, which in turn will also lower the interest rates over a period of time.

BonRetours.in

Article first published: Tuesday September 8th, 2020, 9:01 PM [IST]

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