In the present economic scenario, loans have become one of the popular financing sources that can sufficiently fulfil big-ticket expenditures. Under such circumstances, individuals can look for secured advances like mortgage loans as a more feasible option for high-value funding. These are financing options availed against the mortgage of a residential or commercial property and come with an extended repayment tenor.
Moreover, the mortgage loan interest rates are affordable and competitive as against unsecured advances and help keep EMIs within one’s repayment capacity. Here are some essential factors to help you understand a mortgage advance better.
Features of mortgage advances
Mortgage loan are primarily available in two types – home loans and loans against property. While home loans are designed to fund a residential property purchase, property loans or loan against property come with unrestricted end-use. Some typical features of these advances include –
Simple eligibility requirements
Depending on the lending institution, the qualifying parameters can vary for these advances. Nonetheless, some essential criteria include age, employment, and residential qualification.
The age bar for salaried individuals is restricted between 33 and 58 years, whereas for self-employed applicants, it ranges from 25 to 70 years. Any salaried employee of MNC, public or private organisations eligible for this loan. Similarly, self-employed individuals need to have a stable and consistent monthly income to qualify.
Any Indian resident fulfilling these criteria can obtain mortgage credit from most lenders. Nonetheless, borrowers should be mindful about how a mortgage loan can influence CIBIL score and avoid factors that hurt one’s credit profile to maintain their creditworthiness. Note that an ideal credit score to procure this loan facility at attractive mortgage loan interest rates is above 750.
Another noteworthy feature of a mortgage loan is its remarkably high loan amount. Based on their eligibility, individuals can secure an advance of up to Rs.3.5 crore as a mortgage advance. The availability of such high-value funding with unrestricted end-use makes it suitable for expenditures like house purchase, higher education abroad, home renovation, and medical expenses.
Nevertheless, the loan amount also depends on the loan to value ratio or LTV offered by the lender. It is the maximum loan amount a lender is ready to provide as a percentage of the property’s current market value. It can go up to 80 to 90%, depending on the mortgage advance selected.
The affordable property loan interest rates only make these advances more popular among Indians.
Furthermore, while availing mortgage advances, individuals only require sharing a few basic documents to verify their eligibility. Thus, they can conveniently obtain substantial funds by submitting KYC, identity proof, address proof, salary slips, proof of business vintage, account statements, Income Tax Return, and property documents based on their employment status.
Note that lenders can also ask for additional documents to verify eligibility.
Flexible tenor options
Mortgage loans also come with flexible tenor options that can go up to 20 years. Therefore, borrowers can get an extended duration to repay the amount as per their financial capacity. Tenor flexibility also allows individuals to select EMIs that are easily serviceable without straining the finances.
However, a long tenor can accumulate higher interests as per the applicable mortgage loan interest rates. On the other hand, shorter tenors mean higher instalments, but the interest accrual can be considerably low. Borrowers must take care of these factors when making tenor selection.
Fast processing of loan applications
Also, for mortgage advances offered by specific lenders, the loan processing time reduces if applicants fulfil the eligibility requirements appropriately.
Such lenders also bring pre-approved offers that help simplify the financing process. These offers are also applicable to several financial products, like home loans and loans against property. Individuals can look at their pre-approved offer by entering their name and phone number.
Interest rates on mortgage loans
Usually, interest rates of mortgage loan are lower compared to the other traditional unsecured funding options. It is because the risk of lending is lower with these advances due to the presence of a mortgage, allowing lenders to provide competitive rates.
However, the property loan interest rates can be different from that of home loans even although they both are mortgage advances. Here, it is essential to note that such a difference is not as remarkable as for unsecured advances.
Based on borrowers’ credit profile, the rates can also differ across financers. For example, individuals who hold a reliable credit profile with an extended history of timely repayments can obtain the loan at attractive rates than otherwise.
Even though mortgage credits are one of the most popular options to raise funds of high value, individuals should assess their cost of the loan. Also, to avail the best mortgage loan interest rate, they can compare loan offers from various lenders and apply. It is one of the essential factors to consider while taking a loan against property because borrowers need to allocate a significant amount from their earnings for instalment payment.