Know About Different Types of Mortgage for Loan in India

Understanding Different Types of Mortgage for Loan in India

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Mortgage for Loan

The most appealing, and the most favored and also the most preferred secured loan is undoubtedly mortgage for a loan. There are several features, benefits, and variety in their offers. Banks and NBFCs offer this secured loan. The borrowers pledge their land or property to lenders to get funds. Approximately 70% of this property value is offered as the loan amount. There are different types of mortgage loans that are offered based on what’s going to appeal to people. Commercial properties or individuals pledge their owned property as collateral for security. Before moving ahead, first, let us understand what a is mortgage for loan?

Mortgage for Loan, Definition:

It is just a loan against a property that you simply own. The property in question might be your house, a shop, or maybe a non-agricultural piece of land. It is offered by banks and non-banking finance companies. The lender provides you the principal loan amount and charges you an interest thereon. You’ll repay the loan in affordable monthly installments. Your property is your guarantee and it stays in possession of the lender until the loan is repaid fully. As such, the lender features a legal claim over the property for the tenure of the loan, and if the borrower defaults in paying off the loan, the lender has the right to seize it and auction it off.

Let’s understand the different types of Mortgage for Loan:

  1. Loan Against Property (LAP): Loan against Property is usually referred to as LAP. LAP is offered for commercial and residential properties. The borrowers need to mortgage their property so as to get funds from lending institutions. The authentic documents of the property need to be deposited with the lender till the time the loan is repaid fully. The repayment of such loans is completed on an EMI basis. Many banks provide an option to calculate loan against property EMI on their website. This is for the convenience of the borrowers. These loans usually have a tenure of up to fifteen years.
  2. Commercial Purchase: Commercial purchase loans are popularly taken by businessmen and entrepreneurs. They take such loans to purchase commercial properties such as shops, office space, and commercial complexes. This loan is apt for such purchases. Funds from this loan should be used to buy the property only.
  3. Lease Rental Discounting: Leasing our own residential or commercial property is a common practice. Mortgage loans are often taken against the leased properties too. This also referred to as ‘lease rental discounting’. The monthly rent amount itself is converted into EMI and also the loan amount is given on that basis. The loan tenure and the loan amount, both depend upon the tenure as to when the property is going to be kept leased. The lease agreement is mentioned by banks and NBFCs who are offering the loan.
  4. Second Mortgage Loan: Banks and NBFCs offer mortgage loans for properties that are already under a loan. If a borrower purchases his property by taking a loan today, he can take an extra loan on the same property for his own needs. When a borrower applies for a Mortgage Loan, it’s commonly called a top-up loan on a home loan. Provided the borrower’s credit score as well as loan repayment history, the lender will give a further required loan. The borrower has got to start paying the EMI of the mortgage for a loan alongside the first mortgage home loan.
  5. Reverse Mortgage: The Reverse Mortgage for Loan (RML) was Introduced in India in 2007 to boost the life of house-owning senior citizens. A reverse mortgage for a loan is a good way for senior citizens to receive some funds if they’re in need of liquid cash and that they have a property in their name. Using their already owned property as a mortgage, the senior citizens can borrow money from a bank which is paid via monthly installments by the bank.
  6. Home Loan: The most common loan in India is a home loan. Consumers apply for small, medium, and real big-sized home loans because the interest rates are competitive, durations are comfortable, and one gets a tax deduction. The borrower gets the chance to refurbish, renovate, and re-build their house. One can take a home loan for purchasing land to make a house or to construct a house on land that is purchased or to even buy an under-construction property. This could be done for new or resale properties. However, the funds that are taken as a loan by the borrower should necessarily be used for the house only. Such funds can’t be used for other personal or business needs.

How to Apply:

Applying for a mortgage for loan in India is often a bit tough, but if done with the right documents and suggested process it’s hassle-free. Carefully read the terms and condition weighing the pros and cons of the bank that you have shortlisted. As the initial step for selecting a loan against property, the applicant must approach the advisable bank with the specified documentation. Once the verification of the submitted documents is completed the loan gets approved. The authorization involves a good amount of your time. It requires following certain processes like an appraisal of credit by the applicant’s bank, collection of the documents against the property by the bank, legal verification and etc.

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Also read:

Reverse Mortgage for Loan: How It Can Help Senior Citizen?

Eligibility and Documentation Process of Mortgage for Loan

What is a Mortgage? Know the Basics of Mortgage Loan

Loan Against Property EMI Calculator

Loan Against Property: Factors That Affect Loan Against Property Eligibility

Loan Against Property Without Income Proof & Income Tax Return

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Your home loan will be processed in 2 steps:

  1. You receive the approval of your home loan.
  2. You sign the loan agreement papers and complete other necessary documentation. The loan amount is thereafter paid directly to the builder by Home First Finance Company.

Loan decisions are made in less than a week. You will receive an SMS on your registered mobile number as soon as we make a decision.

HomeFirst does not charge any prepayment fees. This applies to both partial and full repayments. In fact, we have a special Auto-Prepay feature to facilitate this process for you.

HomeFirst offers loan tenures between 1 year to 25 years. If you opt for a longer tenure, you can get the advantage of a lower EMI each month.

HomeFirst can provide finance up to 90% of the property value. The balance has to be arranged by you from other sources. Please note: 90% financing is only available for loans amounting to less than Rs. 30 lakhs.

All co-owners of the property have to be co-applicants to the loan. A person who is not a co-owner can also become a co-applicant to the loan.

During the construction phase, HomeFirst will disburse funds to the builder on your behalf. These will be based on payment requests made by the builder as per the construction schedule.

HomeFirst will charge interest only on the amount disbursed as loan during the construction phase. In this period, interest is charged only on the disbursed loan amount. For example, if you have a sanctioned loan of Rs 10 lakhs, but the property is under construction and we have disbursed only Rs 4 lakhs, you will be charged interest only on 4 lakhs. These interest payments are referred to as pre-EMI interest payments.

EMI payments will start only after completion of the project and registration of the property.

All cheques to HomeFirst should be written out in favor of ‘Home First Finance Company India Limited’.

In the event of an unfortunate incident, home loan insurance will help you or your family pay off the home loan. This ensures that the burden does not suddenly fall upon family members at a bad time.

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