Currently, mortgage loans are one of the sought-after financial products in India. Individuals owning a property can leverage it at times of massive financial crunch. Here, instead of selling it, individuals can mortgage their property (residential or commercial) to lending institutions and get funds easily. By availing a mortgage loan, individuals can fund both personal and business expenses without any end-use restrictions. However, there are certain factors individuals must know before getting a mortgage.
Things to Know Before Getting A Mortgage
Below are discussed important factors individuals need to know before getting a mortgage,
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Property evaluation parameters
A mortgage loan can be availed against a residential (self-occupied or rented) or commercial property. Real estate that can be mortgaged includes a house, shop, commercial complexes, pieces of land and similar sort of properties.
Here, after mortgage loan, lending institutions will send a licensed appraiser to evaluate the market value of a property. This market value depends on several factors such as the property’s location (urban or outskirts), condition, age and many other things. Remember, types of property and location are also important determinants of mortgage loan interest rates.
Depending on the market value, lenders sanction a certain percentage as mortgage loan amount, which leads to the next section of the loan-to-value ratio. Hence, individuals must know these property evaluation parameters and ensure the property in question is free of disputes.
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Loan-to-value ratio
A loan-to-value ratio is the maximum amount individuals can get as a loan on the basis of the current market value of a property. Higher loan-to-value ratio results in a higher loan amount and vice versa.
Currently, individuals can get up to 70% of the property’s value as a mortgage loan. Therefore, they must conduct thorough market research to get the maximum LTV as a loan amount. Knowing LTV or total loan amount is essential to decide on mortgage type depending on individual needs and calculating EMI.
Here, individuals can use the mortgage loan calculator to find out a suitable EMI (by trying various tenor and interest rate combinations) without burdening their pockets. Remember, residential property mortgages attract higher LTV than commercial property.
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Type of mortgage available
Knowing the types of mortgages available in India is one of the prime tasks of a mortgage loan applicant. Under the Transfer of Property Act, 1882, there are six types of mortgages available in India. These are simple mortgage, usufructuary mortgage, mortgage by conditional sale, mortgage by deposit of title deeds (known as equitable mortgage), English mortgage and anomalous mortgage.
Further, depending on the various parameters, mortgage loans are classified into different categories. These are loan against property (LAP), commercial property loans, second mortgage loans, lease rental discounting, reverse mortgages etc. Therefore, depending on the mortgage types and types of mortgage loans available, individuals can select the right one as per their requirements and preference.
For instance, individuals can use loans against property to fund a child’s higher or overseas education, marriage etc. Others can use commercial property loans by mortgaging commercially-run spaces to raise funds for purchasing another commercial plot.
Remember, while taking a loan against property or any other mortgage loan, it is imperative to know the charges of your LAP as well as other variants.
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Eligibility criteria of mortgage loan
Before focusing on how to apply for a mortgage loan, individuals must know the eligibility criteria for a mortgage loan to ensure a smooth loan approval process.
Though the eligibility parameters differ from one financial institution to another, the general criteria include applicants must be Indian, must have a fixed income, their age must be between 23 and 70. Age criteria can differ depending on the employment status, i.e. salaried (private, public or MNC) or self-employed.
Further, they must have necessary documents, including personal, income and property papers.
Finance is that branch or field of commerce that deals with arranging funds and assets over a period. Finance also means the management of money. One is the most important element of finance is the time value of money, which is nothing but the purchasing power of a unit varying with time. Finance is further divided into three categories:
- Personal Finance
- Corporate Finance
- Public Finance
Personal finance deals with finance for protection against some unforeseen personal events. It also includes finance for the hierarchy of the family. Personal finance shows the credit standing of a person. So, if you are looking to buy a moped on finance, so certainly you can get mopeds on finance at easy rate of interest. A person who wants to make purchases of vehicles, lands, and other assets should have a strong financial capacity. Personal finance includes arranging finance or investing and accumulating larger things in life. It is suggested that you should check on different finance companies to grab the best deal of moped finance. Different types of personal finance include
The Conclusion of Mortgage Loan
After fulfilling these eligibility criteria, individuals can easily avail mortgage loans. Reputed financial institutions provide mortgage loans against relaxed eligibility criteria and minimal documentation.
These financial institutions also provide pre-approved offers to simplify loan processing. Moreover, these offers are also available on different financial products such as home loans, loans against property etc. Individuals can easily check their pre-approved offers by giving names and contact details.
Now that individuals know what a mortgage loan is as well as related essential factors, they can opt for one without any hassle.
