With the RBI slashing its repo rate multiple times this fiscal, the current rate stands at 4%. Needless to say, such a decision has worked in favour of intending borrowers and is expected to make availing funds like mortgage advances more affordable.
Nonetheless, individuals must also make it a point to find out all the relevant details of a mortgage loan before applying for it. To begin with, they should learn about the features, eligibility criteria and documents required to secure the financial help at a better deal.
Features and benefits of mortgage loans
This secured loan option comes with the following features and benefits.
- Interest rate
As a secured funding option, these loans come at a relatively lower rate of interest. Notably, the rate of interest often varies from one applicant to another. Usually, the rate of interest depends on factors like – interest type, applicant’s creditworthiness, job stability, the market value of the mortgaged property, etc.
A loan against property or a home loan typically comes with a flexible tenor ranging between 2 and 20 years or more. Notably, the repayment tenor may vary for salaried and self-employed applicants. Depending on one’s repayment capability, one can select a suitable tenor.
Additionally, applicants must also understand how their tenor affects their rate of interest and monthly EMIs. For instance, usually, a shorter term attracts a lower rate of interest.
- Loan-to-value ratio
Loan to value is the ratio that determines the maximum percentage a lender can extend as a mortgage advance against the property’s current market value. Generally, a high loan to value of up to 60% to 80% is extended to eligible applicants against their mortgaged property. Mostly, a residential or commercial property owned by the applicant is mortgaged as collateral security to avail a home mortgage loan.
- Balance transfer facility
Specific financial intuitions may also extend the facility of balance transfer to customers and help them reduce their financial burden significantly. Such a facility comes with a lower rate of interest than existing and a top-up amount with unrestricted end-use.
- Ease of use
This secured loan comes with restrictions to end usage depending on the type of loan availed. For examples, home loans can be utilised only for house purchase or construction. Conversely, a loan against property has no such restriction, making it possible for users to meet several financial requirements with ease.
Borrowers can use the amount availed as a loan to fund their wedding, their child’s higher education, meet medical expenses, fund business ventures, etc. Most housing finance companies provide customised credit to salaried and self-employed applicants.
- Application and disbursal
One can easily apply for this loan online in just a few simple steps. Also, the fact that some financial institutions require minimum documents accelerates the process of verification and loan approval.
Eligibility criteria for a mortgage loan
Applicants can qualify for a loan against property by meeting these simple eligibility criteria.
- They should be resident Indians living in selected cities.
- Self-employed applicants must belong to the age group of 25 and 70 years.
- Salaried applicants should belong to the age group of 33 and 58 years.
- Applicants must have a good CIBIL score and credit history.
- They should have a stable source of income.
When you apply for a mortgage loan after fulfilling all the eligibility criteria, you stand an improved chance of approval.
As for home loans, the basic criteria remain the same, while lenders might require you to fulfil additional eligibility like property purchase in specific locations.
To apply for a mortgage loan, applicants need to submit these following documents.
- Latest salary slips
- Aadhaar card or PAN card
- Proof of address
- IT Returns
- Latest bank account statements
- Passport-size photographs
- Documents of the property which will be mortgaged
It must be noted that the list of documents needed to apply for a loan against property or a home loan can vary from one financial institution to another.
Thus, before applying, individuals should make it a point to find out all about a mortgage loan to streamline the application process and manage it more effectively. Furthermore, with a better understanding of the features and associated conditions, intending borrowers will be better positioned to make an informed decision pertaining to the loan option and its lender.