loanagainst

What is Loan Against Property?

Mortgage Loan commonly known as Loan Against Property in India is a secured loan that is sanctioned against fully constructed, freehold residential and commercial properties.

At, 3M Loans, we believe in educating our customers so some of the key factors are given below for your consideration before you apply for Loan Against Property.

Purpose

Loan against Property is normally can be taken for funding various personal or business needs of an individual e.g.

Business Expansion
Education Expenses of Children
Marriage in Family
Purchase of Home or Office
Improvement or Extension of Existing Property
Any Other Personal Need
eligibility

Eligibility

The applicant for the loan should be:-

  • Minimum 21 years of age
  • Salaried Individual
  • Self Employed professionals / non-professionals
  • Applicant should be the owner of the property and all co-owner has to compulsorily be co-applicant in the loan, however the co-borrowers need not be the co-owner to the loan.

 

Loan Amount

Typically you can get up to 55% 70% of the value of the property or twice your annual income (whichever is lower) as a Loan Against Property and nowadays lenders have many other different products like Banking Surrogates. On the basis of your running loan tracks, the maximum loan amount is normally between Rs. 5 10 crores, but can be extended in some cases depending on the borrowers profile.

The final loan amount is dependent on host of other factors like income and regular outgoings, existing loans, repayment track record, valuation of the property by the lender etc.

Loan Against Property is given on the below mentioned properties and the percentage that you can get loan is listed below.

Residential Property:

Self-Occupied 75%

Vacant – 60%

Rented – 60%

Commercial Property:

Self-Occupied 60%

Vacant – 55%

Rented – 55%

This varies from Bank to Bank in 5- 10% of the above.

To calculate as to how much you can pay, it is looked at, by most banks in the below mentioned ways

For Salaried:

{(Net Take Home – Obligation) * 70%} / EMI per Lakh

For Self-Employed:

{(Income – Obligation) * 65%} / EMI per Lakh

Whichever is lower from the value of the property or your income- that loan amount will be given to you.

The other criteria is maximum age:

For Salaried 60 Years and For Self-Employed 70 Years

Rate of Interest

Loan Against Property is normally available on both – Floating and Fixed rate of interest. Many banks and NBFC offer fixed rate of interest with a reset clause of 2-5 years which means that your fixed interest rate will be reviewed every 2-5 years and can be increased or decreased as per the terms and conditions mentioned in the agreement and floating rate based on the market conditions and effective repo Rate.

Repayment
Most lenders offers maximum tenure of 15 years, however, it is also dependent on the borrowers age at the end of the tenure so as to ensure that the loan repayment ends on or before the retirement age of the borrower which is usually 60 years for salaried and 70 years for self-employed borrowers.

Fees and Charges

  • The processing fee for Loan Against Property may vary from lender to lender but generally is from 0.45% to 1% (excluding service tax) of loan amount.
  • The loan can be foreclosed any time on the payment of applicable penalty, however, if the loan is taken on floating rate from the bank, then the borrower need not have to pay any foreclosure charges.

Document Checklist

To start the loan process, the lender will require proof of –

  • Identity
  • Age
  • Residence
  • Income
  • Property Documents including Title Deeds, Chain of Documents etc.

Our consultant will guide you for the exact list of documents (LOD) needed as per your profile.

FAQ

How does the lender decide the loan amount?

Bank or lender will verify your repayment capacity. To calculate your loan amount – your income, age, qualifications, family member’s income, assets, liability, continuity in business or job and finally 60 70% market value of the property is considered.

Can I keep Co-applicant?

Yes – you can keep your spouse or blood relative as a co-applicant which leads to increase your eligibility. But property owners or co-owners have to be there in the loan structure.

What is the Processing Charge?

Processing fee varies from bank to bank, however, most of the banks charge upto 1% of the loan amount.

How the rate of interest calculated?

Interest is calculated on Daily Reducing Balance which reduces your interest on the reducing principle balance.

What tenure will I get?

Loans Against Property has a maximum tenure of 15 years, subject to the condition that it does not exceed your retirement age. This condition however can be flexible in certain cases.

How to repay the loan?

You repay the loan by EMIs which consist of Principle and Interest. EMI starts from the following month of the disbursement. You can do part payment too after 6 months as there are no charges.

What kind of security bank consider?

As the Loan Against Property justifies itself you need to mortgage your property for availing the loan. This mortgage is equitable mortgage by Memorandum of Entry by way of deposit of title deeds and/or such other collateral security, as may be necessary. Bank verifies the title of the property and if it is clear you can get the loan. There should not be any litigation.

What are the foreclosure charges?

Yes – you can foreclose your loan after 6 months. Here, no foreclosure charge is applicable to individuals. You have to close it from your own funds. Few lenders charge if you do a balance transfer.