Acquiring loans against property has become very easy these days. You can avail loan against property online on any money lender’s website. The LAP enables you to borrow relatively large funds. The product has easy documentation, quick approvals, a lower rate of interest, and flexible payment options for repayment.
As per the Transfer of Property Act, 1882, a loan against property is an interest’s transfer in a specific immovable property to secure payment of money advanced or to be advanced by way of borrowing. In simple words, this means you can apply for a loan by extending the property as collateral or security. The definition of LAP includes the transfer of interest, but the ownership of the property remains with the borrower—the ownership transfer with the lender only when the borrower defaults on the loan amount. If you are looking to get a loan against property, then here are some essential aspects that you should check before applying with any money lender.
Aspects to Check Before Applying for Loan Against Property:
Value of your property
If you are applying for a loan against your residential property or commercial estate, you must be aware of your property’s current market value. For example, if you need a loan of ₹ 40,00,000, but the current market value of your property is ₹35,00,000,* then you might not be eligible for availing the entire amount of ₹40,00,000*. The sanctioned loan amount cannot be more than the property’s value. You can avail up to 70% to 80% of the property’s market value as a loan. If your requirement is higher than the property’s value, then you need to consider other financial options along with it. However, you might be eligible for the lower loan amount, depending on your income and occupational status.
Loan against property is generally taken when there is a requirement of significant funds. The loan amount will depend not only on the current market value of your property but also on your monthly income and repayment capabilities. Depending on the income, you can schedule regular EMI schemes and the repayment tenure, which is maximum up to 15 years. You must draw a comfortable income to manage your financial options and to make regular repayments against the loan. Recently, money lenders are giving more importance to borrower’s income status. A borrower with a steady income will be able to pay the EMI consistently. There are fewer chances of defaulting the payment against the loan. Also, the money lenders do not have to worry about selling the pledged property to recover their LAP amount, which further takes intensive time and effort.
Co-applicant for a mortgage loan
If you alone cannot meet the income and repayment capabilities for availing loans against property, then you may bring in a co-applicant. The moneylender will then check all the documents of the co-applicant to ensure if together can repay the mortgage loan amount.
Also read: How is Fixed Deposit Interest Calculated?
Ownership of property
If you are the property’s sole owner, then there should be no problem in acquiring the loan against the same. If there are co-owners who disagree with your decision of applying for LAP or the property is disrupted or disputed with necessary documentation out of place, then the mortgage loan can be rejected.
Check out other charges
Apart from the loan against property interest rate, there could be additional charges, including the processing fees, pre-payment charges, sales tax, agent fee, and much more. You must be aware of all the hidden costs included in the deal. You need to add them all like the total amount for acquiring the loan.
Hence, these are some important aspects every borrower should have to check before availing of the property loan. Must compare the interest rates of different lenders and fulfill the eligibility criteria for getting instant approval on a loan.