Basics of Loan against Property

Loan against Property

For those who own properties, loan against property is an excellent alternative to a personal loan. The term, as the name suggests, is a secured loan given against the mortgage of one’s property. In this process, the borrower gives a guarantee or pledges some property that he/she owns as a security, against which the loan is issued. Usually, lenders restrict the upper limit of such loans to 40–60% of the market value of the property. Summarized below are certain aspects of such loan that borrowers should know about before they begin the process of obtaining it –

Purposes

Such loans can be availed by borrowers for numerous purposes, including financing the medical treatments for any member of the family, financing one’s dream vacations, sending children abroad for further studies, getting children married and even for expansion of one’s business.

Eligibility

Right from businessmen and self-employed professionals to salaried people, anybody who owns property can avail of and borrow a loan against property. Different Banks, financial institutions and other lenders, all have different criteria to whom they lend and how much they lend depending upon certain stipulations. These include the value of the property, the gross annual income and the age of the borrower, the firm where the borrower is employed, the length of their service remaining, their credit history, their declared assets and liabilities, and the number of dependents in their family, among many others.

Types of properties

Whether it is a piece of land, rented residential property or a self-occupied one, any real estate component which the borrowers own can be used for taking loans against it.

Amount

Banks and other lenders provide a maximum loan amount which is 40–60% of the property’s market value and the rest has to be borne by the borrower. However, the fair market value of the property against which the loan is being taken should be more than INR 5 lakhs. Hence, keeping the stipulations in mind, the least amount of the loan receivable by any eligible borrower is about INR 2 lakhs.

Fees, interest and tenure

The current rate of interest for such loans in India is between 13% and 15.5%, which is lower than most consumer loans. The fees applicable for this loan are the usual such as processing fees, prepayment fees and any others that lenders may charge. The tenure of repayment can be as long as 20 years in case of some banks.

Documentation for property loan

Typically, documents required for loan against property are proof of identity and residence, title documents of the property in question, passbook and/or bank statements for the past 6 months, form 16, and latest salary slips.

Additionally, business people and self-employed professionals will need to furnish proof of the existence of the business, certificates of their educational qualifications and, most importantly, the income tax returns of the past three years (excluding salary slip and form 16). Certain banks might ask the borrower for balance sheet and profit and loss statements for the past years in case of business people.

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by Balaji R via Visakhapatnam, Vizag | Apartments, Flats, Homes, Houses, Plots, Property, Properties, Real Estate, Villas | for Sale | Shriram Panorama Hills