Mortgage home loans started to roll out in America in the late 1970s. It eventually penetrated the Indian market and became a popular financing option for individuals looking to avail substantial funds to meet emergency requirements. Although several types of mortgage loans are prevalent in the Indian market, loans against property are particularly popular.
- Per predictions made by CRISIL and a leading financial institution, the market for these retail loans are expected to reach Rs.96 trillion within 2024.
- Secured loans, including loan against property, showed promising growth in the latter half of 2020, owing to a reduction in interest rates.
These loans are particularly popular in India owing to the fact that they are available against collateral and require borrowers to satisfy minimal eligibility requirements.
Following is an elaboration on such mortgage loans in India.
What is a mortgage loan?
A mortgage loan is a type of secured credit option where individuals can pledge their immovable asset like residential or commercial property to raise funds. Lenders treat the collateral as security till the loan is settled. In this regard, individuals should know how mortgage loan influences their CIBIL score and plan their repayments judiciously.
However, depending on the terms, there are different types of mortgage loans extended by financial institutions in India. Individuals need to understand each of them to leverage the benefits effectively.
Types of mortgage loan
Typically, there are three types of mortgage loans available in India. These are –
- Loan against property
It is a secured loan option that is available against collateral. Individuals need to pledge their residential or commercial property to avail the loans. Till the end of the tenor, the papers of the property remain with the lender. Borrowers can release the property papers after the loan amount has been settled in full. These funds are available without end-use restrictions and can be utilised to meet any number of personal and professional requirements.
Usually, a loan against property comes with an extended tenor and a high value.
- Reverse mortgage
- This mortgage loan option was introduced in India in 2007.
With this funding option, senior citizens can hypothecate their self-occupied residential property to facilitate a steady stream of funding. However, to avail the funds, they will need to fulfil certain eligibility criteria.
Among the above-mentioned options, a loan against property is the only one that is available against easy eligibility requirements.
Features of a LAP loan
Some of the crucial features of a LAP loan are listed below.
- High loan volume
Individuals can avail a high amount through a loan against property. However, the loan amount primarily depends on the current value of the property. Lenders offer an LTV of up to 80% as this loan.
Selected financial institutions offer high value funds to eligible candidates with competitive property loan interest rates.
These HFCs also provide pre-approved offers to customers to streamline the loan application process. These offers are available on several loan products like loans against property, home loans, etc. You can check your pre-approved offer by entering basic credentials like your name and contact number.
- Easy repayment structure
Generally, a LAP loan comes with a longer tenor of up to 20 years. Thus, individuals can choose a tenor that fits their repayment capacity the best. To ensure the same, first, they should learn to determine the ideal tenor of loan against property. It facilitates smooth repayment and ensures a pleasant borrowing experience.
However, for further convenience, they can use a loan against property calculator to estimate the EMI payable.
- Minimal eligibility
Being a secured credit, borrowers do not have to go through stringent eligibility checks like that of an unsecured loan. Due to the same reason, mortgage loan interest rates also remain low. Consequently, the EMIs becomes affordable. However, you can further lower EMIs with a flexi hybrid LAP. It allows you to pay interest only on the funds availed and not on the whole corpus.
Although the history of mortgage loans in India is not recorded clearly, it has emerged as one of the most popular borrowing options over the years. Their popularity is only slated to grow in the next few years.