Mortgage loans are unquestionably one of the most popular types of borrowing. It is ranked first on the borrower’s list due to its high loan value and longer-term. But did you know that these financing products are divided into different loan types? If you are unaware, read this article to learn more.
- Loan Against Property:
The Loan against properties in India is regarded as one of the most common forms of mortgage loans. It is often known as LAP. The loan is available to those who own land, commercial buildings, or residential property. Under this type of financing arrangement, the property documents remain with the lender until you repay your loan in full. Borrowers must review the loan against property documents and eligibility criteria before submitting their loan application.
Following are some of the key features of loan against properties:
- You can apply for this loan for a maximum tenure of 15 years.
- The lender provides you with a mortgage loan with an LTV ranging from 40% to 75%.
- The loan is accessible for a minimum and maximum sum of Rs. 50 lakhs and 15 crores, respectively.
- The funds can be utilised for any legitimate purpose.
- Commercial Purchase Loan
Commercial purchase is a form of mortgage loan that you can take to purchase shops, commercial plots, office space, and a few others. The loan is available to various types of businesses. Under this type of loan against properties, the property papers of the commercial real estate are kept with the lender until the loan is repaid in full.
Following are some of the features of a commercial purchase loan:
- You can use this option to finance the acquisition of new or used office space.
- This loan can also be used to update, renovate, or extend the construction of any commercial structure.
- Self-employed non-professionals and professionals can both apply for this loan.
- You have the option of applying jointly or individually to this loan.
- Reverse Mortgage Loan
This type of loan against property is available to old-age individuals. When you apply for this mortgage loan, the lender provides you with a fixed monthly payment. Under this kind of loan, you don’t have to pay EMI. At the conclusion of the loan tenure, you have the option of selling your property or paying the lender through any other means. The loan is suitable for old age people if they are planning for a lifelong stay in the mortgaged property.
Following are some of the key features of a reverse mortgage loan:
- The loan is available to individuals who own residential property.
- You can apply for this loan against property only if you reside in the property that you are willing to mortgage.
- The loan is available to senior citizens.
- The maximum tenure for which you can benefit from this loan is 15 years.
- After the death of the borrower, the legal heir has the option to repay the debt without selling the property.
- You can enjoy the tax benefits under section 10(43) of the IT Act 1961.
- Home Loans
A home loan is a secured form of financing which is backed by the loan against property documents. Once you repay the principal loan amount along with the interest component, the lender transfers the property title to you. However, in the event of default, they have the complete right to auction your property and recover their unpaid dues. Some of the common forms of home loan include home purchase loans, home improvement loans, home construction loans, land purchase loans, and top-up home loans.
However, when compared to the loan against properties and reverse mortgage loans, you can utilise the funds from the home loan only for a reason specified in your loan document. It implies that there is no flexibility in terms of usage.
Following are some of the key features of a reverse mortgage loan:
- Most lending institutions offer this loan for a maximum period of 30 years.
- The home loan is accessible to both salaried and self-employed.
- The minimum and maximum age to apply for this loan are 18 years and 75 years, respectively.
- The maximum amount for which you can apply for this loan is Rs 5 crores.
- Lease Rental Discounting
You can source funds from the property you have leased out! Are you surprised to learn this? Don’t be. We are discussing leasing rental discounting. This is a type of mortgage term loan where funds are granted against the property’s rental receipts. Under this kind of loan against property, the rent that your property fetches is converted into EMI, and the lender sanctions the funds accordingly.
To Sum it Up:
Above are some of the commonly used mortgage loans in India. Now that you are aware of the numerous types of loans against properties available, do respond to us that which product you like the most and why.
