Design Credits: Rakesh Mohan
A Mortgage Loan is a money advance given by a bank against your property. The property could be your house, a piece of land or any other form of personal or commercial real estate in your name. This makes it a secured loan, which means the lender can forfeit your property if you fail to repay the loan. If you are buying a property for the first time, you can use it as collateral to get a Mortgage Loan. This is also known as liens against property or claims on property.
For what can I use a Mortgage Loan?
A Mortgage Loan can be used to cater to a host of personal financial needs, but it is most commonly used to purchase property. A Mortgage Loan can also be used to buy commercial or industrial property. The biggest advantage of this loan is that you can continue using the mortgaged property while repaying the loan. Once the loan is paid in full you are returned complete ownership of your property.
This loan will help you out whether you want to expand your business, buy a house, send your children abroad for higher studies or pay for an expensive medical treatment. It has you covered.
What kind of properties can I mortgage?
Almost all kind of real estate qualifies for a Mortgage Loan. You can mortgage the home you live in, or the one you have rented out. It could also be a piece of land in your name. Commercial and industrial property and property under construction can also be mortgaged.
How much loan can I get against my property?
Most banks loan a sum equivalent to 50%-60% of your property value. Some banks, if they sense good appreciation of your property, can raise the bar to 75%. Keep in mind, banks will reassess the value of your property from time to time.
What is the interest rate on a Mortgage Loan?
The interest rates on a Mortgage Loan commonly hovers around 12% to 15% range, making it one of the most affordable loan offerings. That’s why a lot of people prefer this over a Personal Loan, which generally comes with a higher rate of interest. In fact, Mortgage Loans are the second cheapest retail loans after Home Loans, offered by banks. Generally, the maximum repayment tenure for Mortgage Loans is 15 years, but it can be more depending on the bank of your choice.
Talking about interest rates, there are three ways to repay a Mortgage Loan. You can opt for a Fixed Rate Mortgage (FRM), an Adjustable Rate Mortgage (ARM) or an Interest Only Mortgage Rate. As the names suggest, FRM requires you to pay a uniform interest rate and principal amount. Under ARM the interest rate changes throughout the repayment tenure, based on economic and market conditions. If you opt for Interest Only option, you will only have to repay the interest amount during the loan tenure and return the principal after that.
When you repay a loan, you return the principal amount with interest and within a time frame mutually agreed upon by you and the lender. For a Mortgage Loan add property tax and insurance costs to this. You might ask, why the insurance? Well, an insurance is to safeguard your property against damages. All this sums up to quite a fat figure. So, make sure you factor in all these components before calculating your EMI.
What is the eligibility requirement to get a Mortgage Loan?
To be eligible for a Mortgaged Loan you have to be salaried or a self-employed person and at least 21 years of age. Other than these two basic criteria the bank will also assess:
- Total Annual Income
- Income Tax Returns For The Last 3 Years
- Total Work Experience
- Experience With The Current Company
- Property Value
- Existing Loans/Liabilities, If Any
- Total Number Of Dependents
The eligibility requirements may differ slightly from bank to bank. Get a quote from as many banks as possible before taking a decision.
What documents do I need to get a Loan?
There are a different set of documents required from Salaried and self-employed individuals. The table below lists documents to be submitted by each.
| SALARIED | SELF-EMPLOYED |
| Completed loan application | Completed loan application |
| Passport size photographs | Passport size photographs |
| Proof of identity: voter card, driving license, pan card, employee id card | Proof of identity: voter card, driving license, pan card, employee id card |
| Proof of address: Aadhaar card, telephone bill, electricity bill | Proof of business; proof of education qualification |
| Your latest salary slips | Certified financial statement for last 3 years |
| Form 16 from last 3 years | Income tax return and profit and loss stamen from last 3 years |
| Bank statements of last 6 months | Bank statements of last 6 months |
| Processing fee cheque | Processing fee cheque |
Additional Reading: Understanding second mortgage loans!
A Mortgage Loan is the darling among all Loans. The ease of getting one and its cost effectiveness has won it everyone’s much-deserved attention. From low-interest rates to long periods of tenure, everything about this loan has made it quite a popular choice among people. It is easily processed and most banks offer perks like partial pre-closure at no extra charge. Lastly, it’s disbursed against the value of your property, which will only stack-up.