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About Mortgage Loan

A property is not just your asset, but it is also the biggest security available to you. At many stages in life, you may want to make high-value purchases, but the lack of funds deters you. At these times, you can avail loan against your pre-owned property. This is known as Mortgage Loan. You can avail Mortgage Loan to finance any personal needs or business expansion requirements. You can also use Mortgage loan for financing a house purchase.

Features of the Mortgage Loan

When you plan to apply for a mortgage loan, you should be aware of a few common concepts that are associated with mortgage loans:

  • The rate of interest on Mortgage loans is much lower than the rates of interest on other loans
  • You have the option to choose from a number of interest rates to service your loan. The options include- floating rates, fixed interest rates, interest-only mortgage and Payment option ARMs.
  • A mortgage loan is one of the easiest ways to avail a home loan. You can be the sole owner of the house once the loan is repaid.
  • The LTV ratio for Mortgage Loans is typically 60%-70%.
  • Most of the lenders provide a loan based on the market value of the registered value of the property whichever is lower.
  • You can avail Mortgage loan against a wide range of properties such as under construction property, fully constructed property, freehold residential and commercial properties. However, it must be noted that the property must be free from legal hassle and encumbrances. The borrower must own clear title to the property.
  • Mortgage Loan is available for a longer tenure.
  • The quantum of funds sanctioned under a Mortgage Loan is usually higher.
  • Selecting property is not a prerequisite for Mortgage Loan. Your mortgage loan may be sanctioned even before your property selection.
  • You can use the sanctioned loan amount against Mortgage for business as well as personal needs.
  • If you are self-employed you also have the privilege of getting customized loan options.

Things that increase your Mortgage Payments

The interest rate plays a crucial role in increasing the size of your mortgage loan. The higher the interest rates, the higher the monthly mortgage payment.

Tax and insurance payments also increase your monthly mortgage payments. Insurance provides you protection against any kind of unforeseen events that may cause harm to your property. There are also real estate taxes which need to be paid.

Benefits of Mortgage Loan

  • Mortgage Loan is most suitable for high-value purchase. In a situation where you do not have adequate funds to make a high-end asset purchase, applying for a mortgage loan is the best solution.
  • Hassle-free :

    Obtaining a mortgage loan is quite easy. If you have met the necessary eligibility criteria and have a strong credit history, getting a mortgage loan isn’t that difficult. Because of the ease in obtaining mortgage loans, there has been an increase in home purchases backed by mortgage in recent times.

  • Secured Loan :

    Mortgage Loan is a secured loan therefore lenders can have less worry in disbursing this loan. Since Mortgage Loan is a high-value loan, the risk quotient is presumably higher. But a lender has the mortgage asset as a security. Borrowers must be very diligent in repaying this loan because if it is not repaid on time, the lenders may auction the property or foreclose the loan.

    Mortgage loan is one of the most cost-effective ways of borrowing. It is usually taken for a longer duration say 20-30 years. This makes the repayment easy and you can pay the EMIs in a flexible manner spread over a long horizon.

Types of Mortgage

The two main types of mortgage loans include:

Fixed-rate mortgage : 

A Fixed-rate mortgage suggests that the interest rate is fixed throughout the tenure of the loan. If case you opt for the annuity payment plan, your monthly repayment will be constant throughout the duration of the loan. On the other hand, if you opt for the linear payment option, your monthly repayments decrease over the period.

Adjustable-rate mortgage : 

This mortgage loan is also known as the variable rate mortgage loan wherein the rate of interest keeps changing over the period. It may remain fixed for a certain period of time, however with the change in the monetary policy decisions of the Reserve Bank of India, the benchmark interest rate may change. This can also lead to a change in the interest rate for the Mortgage Loan. 

Interest-only mortgage : 

There is a third type of Mortgage Loan called the interest-only mortgage. In this type of loan, you only need to pay the interest component towards the loan. This means that the interest amount remains constant throughout the tenure of the loan. The entire principal amount must be repaid at the end of the But, at the end of loan tenure, you need to pay off the principal amount as well.

Eligibility Criteria of Mortgage Loan

  • Your total annual income as a salaried person should be more than Rs 40,000 per annum and Rs 3 lakhs per annum for self-employed individuals.
  • Minimum age requirement is 18 years and the maximum is 65 years
  • Both salaried and self-employed individuals are eligible to apply for a mortgage loan

What is the documentation required for a Mortgage Loan?

Salaried IndividualsSelf-Employed individuals
A duly filled up loan application form.A duly filled up loan application form.
Recent passport size photograph.Recent passport size photograph.
Proof of identity to be submitted, such as voter card, driving license, PAN card, passport, employee ID card, etc.Identity proof such as voter card, driving license, PAN card, passport, employee ID card, etc.
Address proof such as ration card, Aadhaar card, telephone bill, electricity bill, voter card, and driving licenseProof of business existence.
 Proof of educational qualifications.
  • Your latest pay slips.
  • Form 16 as issued by your employer.
  • Last 6 months Bank statements
  • Certified financial statement for the last 3 years.
  • Income tax return certificate for last 3 years.
  • Profit and loss (P&L) statement for the last 3 years
  • Bank statement for the last 6 months.
A cheque towards processing fee.A cheque towards processing fee.

Mortgage Loan Process

The process for Mortgage Loan processing is as follows:

  • Collection of all the documents as specified by the bank.
  • Credit appraisal to be carried out by the credit analyst of the bank
  • If the credit appraisal is positive, the loan is approved after the requisite verifications.
  • The loan sanction letter is delivered to your doorstep while a soft copy is mailed to the email id
  • The mortgage property documents are sent to the bank
  • Legal verification of the property document is carried out
  • Once the verification is successful, the final loan disbursal is done.

Frequently asked questions: Mortgage Loan

1. Can only salaried employees avail Mortgage Loans?

No, salaried as well as self-employed individuals both can apply for Mortgage Loans

2. What is the loan amount that I can receive?

You can receive up to 60%-70% of your property value as loan approximately. In some cases, you may also get 80% of the loan.

3. How long will the lender take to process the entire loan application?

Usually, it takes around 7-10 working days to process the loan application and disburse the loan. The time period may vary across banks.

4. What are the various repayment options available for Mortgage Loans?

There is absolute flexibility in repaying mortgage loans. You can repay it through the EMI mode as well as the ECS system or post-dated cheques.

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