A mortgage loan or a loan against property is a type of secured loan under which a borrower pledges a residential or commercial property as security in return for loan money. Loans against property draw affordable interest rates and come with a long repayment tenure. The loan is paid in the form of EMIs which constitute a principal component and an interest component. During the initial years of loan repayment, the interest component is higher than the principal component.
There are a few things that borrowers must know about the working of a mortgage loan:
– Even though a borrower pledges their property as collateral under a mortgage loan, they do not lose ownership rights. The borrower can continue to use the property after pledging it as securely as they were using it before taking the loan.
– Under LAP, the lender does not get ownership rights. The lender gets to keep the property papers and can sell the pledged property for recovery in case a borrower fails to pay EMIs for an extended period. Even in the case of a loan default, the lender cannot sell the property without informing the borrower and giving them ample time to save their property. Thus, contrary to what some people think, loans against property are as safe a loan option as any provided one borrows what one can easily repay.
– Once the borrower has repaid the loan, the lender must release property papers immediately and also release a NOC letter which states that the lender has no rights whatsoever over the property that the borrower had pledged as security.
Now that we have a clear understanding of how a mortgage loan works, let us look a detailed view at the processes involved in availing of LAP.
Mortgage Loans: Steps Involved in the Application Process
If you are planning to apply for LAP, you will have to go through the following steps.
– Before you make an application for a loan against property with a lender, do thorough market research and see what different lenders have to offer to you. Make a list of lenders who you think are offering lucrative deals. Use a mortgage loan EMI calculator to compare offers from these lenders and in the end, choose to go with the lender offering you the lowest interest rate alongside other perks and services.
– Next, use a loan against property calculator to figure out the maximum loan amount you can apply for. The maximum loan value you can avail of will depend on many things but primarily your income profile and the value of the property you wish to mortgage.
– Go to your chosen lender’s website and see their eligibility criteria. Make sure you are eligible to apply before making an application since a loan against property rejection can directly hit your credit score. If you do not qualify, either improve your eligibility or apply with a different lender.
– If you are eligible, fill out the application form. This step will involve you disclosing personal and income details. So, keep all documents you might need during the process ready with you. Once you have filled the form, your lender will assess your profile and revert to you with a decision.
– If the lender thinks you can repay the loan and can be trusted, they will release a sanction letter outlining the terms and conditions of the offer. If you agree with the terms and conditions, sign the letter and send it back to the lender. If you have objections, raise your points and negotiate for better terms and conditions.
– Once you have accepted the offer, your lender will verify all documents provided by you. They will also send someone to assess the property you wish to pledge as security.
– If the lender is satisfied, they will release the final loan agreement. You will be required to visit a branch and sign the papers.
– The last step of the process is disbursal. This step can take from a few days to a few weeks, depending on the lender you have chosen and how quickly they are. However, it’s best that you keep some buffer time for loan approval.
These are the steps involved in applying for a loan against property in India. If you are planning to avail of a mortgage loan in India, choose to go with Bajaj Housing Finance. The NBFC is a wholly-owned subsidiary of Bajaj Finance Limited and is one of the most trusted names in the market. More importantly, Bajaj Housing Finance offers loans against property at interest rates starting as low as 9.50% p.a. and for a period extending up to 18 years.
However, the biggest advantage of applying for a loan against property is Bajaj Housing Finance is quick disbursal. Unlike other lenders who take weeks to sanction and disburse the loan amount, Bajaj Housing Finance disburses all loans within 72 hours of document submission and verification. This is a great advantage, especially when one is availing of a loan against property to take care of a financial emergency.