A financial emergency can happen anytime. One of the best ways to meet this requirement is through a mortgage loan. However, what is mortgage loan? Not many people have full clarity on this. In this article, we tell you more about mortgage loans.
What is Mortgage Loan?
Mortgage loans are without a doubt the most popular, most attractive, and most sought-after type of secured loans. They offer a wide range of features, benefits, and options. The mortgage loan process sees people who want to borrow money put a residential or commercial property they own up as collateral with the lender. The loan amount is usually about 70% of the property’s current value. Mortgage loans are sanctioned at low interest rates and for a long repayment tenor. Now that we know what is mortgage loan and a little bit about the mortgage loan process, let us look at the different types of mortgage loans.
There are many different kinds of mortgage loans based on what people want. People or businesses can use their own property as security by pledging it as collateral.
There are 5 types of mortgage loans:
- Loan against property
- Commercial purchase loan
- Lease rental discounting
- Second mortgage loan
- Reverse Mortgage
Let’s discuss each of these mortgage loan types in detail
Loan Against Property (LAP)
LAP is short for “Loan Against Property.” LAP is offered for both commercial and residential properties. This is the most popular type of mortgage loan available in India. In order to get money from lending institutions, the people who need it have to put their property up as collateral. To secure the loan, the borrower must deposit the original property documents with the lender. EMI is the way that these loans are paid back. The loan amount can be used for anything, whether it’s for personal or business needs. Most of the time, these loans last for up to 20 years.
So, how do you calculate your LAP EMI? Loan Against Property EMI calculator is an online tool that determines your EMI on a loan secured by a piece of property based on the data you enter. Although it’s not difficult to meet the requirements for a Loan Against Property (LAP), a loan application that highlights your ability to make timely payments will increase the likelihood that your request will be approved quickly.
The Loan Against Property EMI Calculator is a free tool that lets users figure out the Loan Against Property EMI. It’s an online tool that makes it easy to figure out your monthly payment and helps you plan your finances better.
Commercial Purchase Loan
Loans for commercial purchases are a common financial tool used by business owners and entrepreneurs. They use these loans to buy commercial properties like a shop, office space, or a commercial complex. These kinds of purchases are good uses for this loan. Lenders offer interest rates that are competitive. The loan money can only be used to buy the property.
Lease Rental Discounting
In today’s market, it’s customary to lease out one’s own home or place of business. Leased properties can also be used as collateral for mortgage loans. This is called ‘lease rental discounting.’ The amount of the monthly rent itself is turned into an EMI and the loan amount is offered on the basis of that. The length of the loan and the amount of the loan depend on how long the property will be leased.
Second Mortgage
For homes that already have a loan on them, lenders offer Second Mortgage Loan. If a borrower takes out a loan to buy a home today, they can use the same home to get another loan for personal needs. When a borrower applies for a Second Mortgage Loan, it is often called a top-up loan on a home loan. The lender will give the borrower more money if they have a good credit score and have paid back their loans in the past. The borrower must start making payments on both the first mortgage home loan and the second mortgage loan.
Reverse Mortgage
In India, a new product called a “reverse mortgage” has just been introduced. It is a loan made just for people aged 60. There are a lot of older people who don’t have steady or enough money coming in every month. But a lot of them own property in one way or another. And this is an option they have. A reverse mortgage does the exact opposite of what a regular mortgage loan does. The process requires them to maintain a mortgage on their property with the lender. The lender then gives them a steady amount of money every month, like an EMI. When the senior citizen dies, the lender has the right to sell the property. The amount of the loan that is paid back to the seniors comes right out of the sale price of the property. The amount left over is given back to the legal heirs of the senior citizen who has died.
Final Thoughts
If you are planning to avail of a mortgage loan, you must first understand what is mortgage loan and familiarize yourself with the mortgage loan process. Lenders offer all these types of mortgage loans and on the basis of your need you can decide which mortgage loan will help you achieve your financial goal.