Housing Development Finance Corporation (HDFC) has re-introduced a scheme of offering loan against property.
Loan against mortgage of Property is regarded as a riskier business as against home loans, and so, attracts a far higher rate of interest as against home loans. To lower the risk in these loans, HDFC has said it will offer loans only up to 50% of the property’s market price. The loan value can increase to 60% if the borrower is a current home loan customer.
This loan against property has an interest rate of 11.25% for loans up to Rs 1 crore and 11.00% for loans exceeding Rs 1 crore. The loan tenure can be maximum of 15 years for residential properties as well as non-residential properties. There is no ceiling on the highest amount that HDFC will lend as per this scheme, the only condition is that the recommended loan to value ratio be retained.
Talking about on the decision to reenter the business, HDFC MD Renu Sud Karnad said: “Availing a personal loan from a lending institution may also be an option. However, the advantage of LAP is that not only is the interest rate lower than a personal loan, but the tenure of the loan is also much longer. This enables a person to take a larger loan compared to a personal loan where the period is very short which has a huge impact on the cash flow and thus the repaying capacity.”