FAQs About Loan Against Property

There are several different types of home loans, one of which is a loan against property. This loan, also known as the mortgage loan is offered by banks and loan against property finance companies which enable lenders to mortgage their property and get the necessary funds required for various reasons. However, most borrowers are not aware of all the aspects of this loan, so we decided to answer some of the frequently asked questions about loan against property.

When can I take a loan against property?

You can take a loan against property for several different reasons such as financing your children’s education, children’s wedding or even funding your business. This loan can also be taken when you have other personal requirements or emergencies e.g. urgent hospitalization. You can simply approach banks or mortgage loan companies to begin the loan process.

What kind of property can I mortgage?

A loan against property can be taken by mortgaging both, your residential as well as your commercial property. 

What is the maximum tenure for this kind of loan?

Typically, a loan against property is provided for a maximum tenure of 15 years. However, lending tenures differ from lender to lender.

Is there any restriction on how I can use the funds?

Typically, you can use the loan amount to fund several requirements, like those mentioned above. However, mortgage providers have certain restriction on the usage of funds. For instance, the money taken by mortgaging a property cannot be used for speculative activities such as share market investments or similar investments considered as gambles. Using funds accrued from mortgage loans for such investments are prohibited.

How much money can I get against the property I mortgage?

Your repayment capacity, coupled with the actual value of the property plays a very important role in determining the amount you can get from mortgaging your property. Lenders conduct a valuation of the property you are mortgaging, after which they offer approximately 50% to 60% of the market value of the property.

Do I need to provide any security to get this loan?

A loan against property is essentially a secured loan in which one offers the property in question as security in exchange for the sums required. Apart from providing your lender with the title deed of the property, you may also have to submit your insurance policy or similar financial instruments as deemed necessary by your lender, be it banks or loan against property companies.

Do I have the option of repaying my loan ahead of my chosen tenure?

Yes, you can repay your loan against property ahead of the tenure chosen by you. It is possible to close this loan without incurring any prepayment penalties; however, this can be done only after a period of six months of availing the loan. Also, prepayment is possible only if the loan is repaid from your own source of funds. You cannot repay the loan by transferring it to another bank or loan against property company.

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Created on Jun 20th 2019 02:37. Viewed 320 times.

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