Home mortgage loans are indeed the most appealing, popular and favoured secured loan in times of a financial crisis. This credit facility offers endless benefits and features which attract potential borrowers. For example, financial institutions in India offer as high as 70% of the property’s current value as a loan amount without any end-to-end restriction.
In this article, we will talk about the different types of home and commercial mortgage loans in India.
Different types of mortgage loans in India
LAP or loan against property
A loan against property is a credit instrument offered by financial institutions in India to borrowers who keep their residential and commercial properties as collateral. Willing borrowers can obtain a sizable amount by mortgaging their immovable assets. In case the borrower fails to repay the full loan amount, including the total payable interest, the lending partner holds the right to dispose of the property and recover the unpaid dues.
Willing borrowers should know the eligibility criteria and the documents required for a loan against property to ensure a smooth borrowing experience. This will ensure that their application does not get rejected by the lender and they get the loan within the shortest turnaround time.
Further, one should also know the tax benefits offered under a loan against commercial property or LAP on commercial property and residential property, under Section 37(1) and 24(B) of the Income Tax Act of 1961.
Commercial purchase
Entrepreneurs usually use this credit facility to purchase commercial property loans, like office space, commercial complexes and shops. Lending institutions in India offer this loan at a competitive interest rate. Borrowers can use the loan amount only to purchase a property.
Lease Rental Discounting
Home and office mortgage loans can also be availed on leased properties. In this facility, the monthly rent gets converted into Equated Monthly Instalments, and the loan amount is disbursed accordingly. The principal amount and the repayment tenor depend on the time till which the borrower intends to keep the property leased. Lending partners check the lease agreement before sanctioning such a loan.
Second mortgage loan
Financial institutions offer second mortgage loans on properties already under a loan. This credit facility is also known as top-up on home loans. Financial institutions check the applicant’s repayment history and credit score and sanction an additional loan amount. In this case, the borrower will have to pay the monthly instalments of the second mortgage loan along with the existing property loan or residential property.
Reverse mortgage
This secure line of credit is introduced for the senior citizens of India who do not have a steady source of income but own real estate. In a reverse mortgage, the borrower needs to keep his/her immovable asset as collateral, and the lending partner will pay a fixed amount every month, just like EMIs. In addition, the lender holds the right to sell the mortgaged property in case the borrower faces death.
Home loan
This is one of the most popular credit instruments in India. Borrowers apply for large, medium or small loan amounts per their financial requirements. Borrowers can re-build, renovate or refurbish their property with the loan amount. Further, one can use the borrowed sum to purchase land or construct a house on their land.
Several financial institutions in India, such as Bajaj Finserv, extend pre-approved offers on a wide range of financial products, such as home loans, loans against property, and many more. These exclusive offers significantly fasten the application procedure and reduce the hassle of documentation considerably. Individuals can check their pre-approved offers by providing their names and contact details in the required section.
To sum it up, commercial or home mortgage loans are indeed one of the most convenient credit facilities offered by financial institutions in India. One can reap the maximum benefits of these credit instruments if they plan wisely before applying. Willing borrowers should always keep in mind to borrow what they actually need as one of these credit facilities need a property to be mortgaged. In this manner, they can enjoy a smooth borrowing experience and avoid financial burdens throughout the repayment tenor.
