When it comes to availing a loan against property, also known as a mortgage loan, in India, it’s essential to understand the different types of mortgage options available to borrowers. Mortgage loans are a popular form of secured loan that allows individuals to leverage the value of their property to obtain funds for various purposes, such as business expansion, home renovation, education, and medical emergencies.
If you are considering applying for a mortgage loan, it’s crucial to familiarize yourself with the types of mortgage loans available in India and their features, so you can make an informed decision that aligns with your financial goals and requirements. In this article, we will discuss the different types of mortgage loans in India, the mortgage loan process, and how to choose the right mortgage type to meet your requirements:
Types of Mortgage India
Fixed-Rate Mortgage Loan:
A fixed-rate mortgage loan is one of the most common types of mortgage loans in India. In this type of mortgage, the interest rate remains fixed for the entire loan tenure, providing borrowers with the benefit of predictable monthly instalments. This means that regardless of any fluctuations in the market interest rates, the EMI (Equated Monthly Installment) remains unchanged, making it easier for borrowers to plan their finances.
Adjustable-Rate Mortgage Loan:
An adjustable-rate mortgage loan, also known as a floating-rate mortgage loan, is a type of mortgage where the interest rate is subject to change during the loan tenure based on the prevailing market rates. The interest rate is usually linked to a benchmark rate, such as the Reserve Bank of India’s repo rate or the Marginal Cost of Funds based Lending Rate (MCLR) of the lender. The EMI for an adjustable-rate mortgage loan may increase or decrease based on the changes in the interest rate, which may impact the borrower’s monthly budget.
Reverse Mortgage Loan:
A reverse mortgage loan is a unique type of mortgage loan that is specifically designed for senior citizens above the age of 60 years. In this type of mortgage, the borrower can avail of a loan against the value of their residential property while continuing to live in it. Unlike other types of mortgage loans, the borrower is not required to make any monthly repayments during the loan tenure. The loan, along with the accrued interest, is repaid by selling the property after the borrower’s demise or when the property is no longer used as the borrower’s primary residence.
Loan Against Property for Self-Employed Individuals:
This type of mortgage loan is designed for self-employed individuals, such as business owners and professionals, who may not have a fixed monthly income. The loan amount is based on the value of the property and the borrower’s repayment capacity, which is assessed based on their business turnover, profit margins, and other financial documents. Self-employed individuals can avail of a mortgage loan to meet their business expansion needs, working capital requirements, or other personal expenses.
Loan Against Property for Salaried Individuals:
This type of mortgage loan is specifically designed for salaried individuals who have a regular monthly income. The loan amount is determined based on the borrower’s income, credit score, and the value of the property. Salaried individuals can use the mortgage loan to finance their immediate or long-term financial goals, such as buying a new property, renovating their home, or funding their child’s education.
Mortgage Process in India
The mortgage loan process in India typically involves the following steps:
- Loan Application: The borrower needs to fill in a loan application form and provide all the necessary details, including personal, employment, and property-related information, to the lender. The borrower also needs to submit the required documents, such as identity proof, address proof, income proof, property documents, and other relevant documents, as per the lender’s requirements.
- Property Valuation: The lender will conduct a valuation of the property that the borrower intends to mortgage to determine its current market value. The mortgage loan amount that can be sanctioned by the lender will depend on the valuation of the property.
- Credit Assessment: The lender will assess the borrower’s creditworthiness by checking their credit history, credit score, and repayment capacity. A higher credit score and a stable repayment history can increase the chances of loan approval and may result in better loan terms, such as lower interest rates and higher loan amounts.
- Loan Sanction: Once the lender is satisfied with the borrower’s creditworthiness and property valuation, they will issue a loan sanction letter mentioning the approved loan amount, interest rate, tenure, and other terms and conditions.
- Documentation and Verification: The borrower needs to complete the documentation process by providing all the necessary documents, including property documents, income proof, and other relevant documents, as per the lender’s requirements. The lender will also verify the provided information and documents to ensure their authenticity.
- Loan Disbursement: After the documentation and verification process is completed, the lender will disburse the approved loan amount to the borrower’s bank account or provide a demand draft as per the agreed terms and conditions. The borrower can use the loan amount for the intended purpose, such as business expansion, home renovation, or other financial needs.
Read More: Apply & Get the Lowest Rates On Loan Against Property In 2023
Understanding the different types of mortgage loans in India and their features is crucial when applying for a loan against property. Consider factors such as interest rate, loan tenure, repayment flexibility, eligibility criteria, and additional charges when choosing the right mortgage type that aligns with your financial goals and requirements. It’s also essential to go through the mortgage loan process, including the loan application, property valuation, credit assessment, documentation, and loan disbursement, to ensure a smooth and hassle-free borrowing experience. By making an informed decision and choosing the right mortgage type, you can leverage the value of your property to meet your financial needs effectively.