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Know All About Loan Against Property

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Most of the banks, financial institutions and housing finance corporations do provide loan against property which is also known as a mortgage loan. This kind of a loan is a secured loan as the loan will be granted against a residential or a commercial property owned by the borrower. After sanction of the loan, the borrower can use the loan amount to serve the purpose for which the loan was applied for.

Usually, as per the norms, the maximum loan amount provided under the mortgage loan in India is up to 70% of the total property value. This kind of loan is cost-effective and are reasonably convenient to avail from banks or financial institutions. Repayment on the part of the borrower is easy owing to low mortgage interest rates.

Know All About Loan Against Property
 

Let's understand in brief about Loan Against Property and other details associated with it.

What is Loan Against Property?

What is Loan Against Property?

Loan against property or mortgage is a kind of debt obtained on the collateral of specified property, that the borrower is obliged to pay back within a predetermined period at specified interest rates.

The borrower can avail loan of up to Rs 25 crore based on the value of the property of up to a tenure of 20 years in case of loan against property.

Features of Loan Against Property
 

Features of Loan Against Property

  • This loan is granted against the properties which can either be an independent house, apartment or flat.
  • The loan is also granted against mortgage of commercial properties like shops, malls, shopping complex, office building and so on.
  • This loan can also be availed against rented residential properties.
  • The loan can be applied for by both salaried as well as self-employed individuals.
  • The loan against property is even granted against a plot of land owned by the borrower.
  • Interest paid for a loan against property is eligible for tax benefits under Section 37(1) of the Income Tax Act 1961.
  • Interest paid on loan provides tax benefits under Section 24 of the Income Tax Act and can be availed up to Rs 2,00,000.
  • The loan against property comes with flexible repayment period.
  • The interest rates on this loan are low as against the personal loan, hence most of the house buyers opt for this loan over the personal loan.
  • Interest rates on this loan are available under two types - fixed and floating. In case of fixed interest rates, the rates will remain firm throughout the tenure of the loan. In the case of floating interest rates, the rates are subject to change during the loan period.
Eligibility Criteria for Loan Against Property

Eligibility Criteria for Loan Against Property

  • The applicant should be an Indian citizen.
  • The minimum age of the applicant should be at least 21 years at the time of submission of application.
  • Applicant should have a good credit score.
  • Applicant should have a regular source of income. They should be either salaried or self - employed and should have a specific number of years of experience in a job or running the business, to secure the loan.
List of Documents for Loan Against Property

List of Documents for Loan Against Property

In case of Salaried Employees

  • Latest Salary slip for the last 3 months.
  • Title Documents of Property.
  • Recent Form 16 and Income Tax Returns details.
  • Proof of Identity - PAN Card, Aadhaar Card, Passport, Driving License, Voter ID Card, Employee Identification Card.
  • Residential Address Proof - Utility Bills (water, electricity), tax paid receipt bill, Passport, Aadhaar Card, Voter ID Card.
  • Bank Salary Credit Statement for the last 6 months.
  • Bank statement of salary account for the recent 3 months.
  • Passport-sized photographs.
List of Documents for Loan Against Property

List of Documents for Loan Against Property

In case of Self Employed

  • Proof of Office Address.
  • Recent Passport sized photographs.
  • Title Documents of Property.
  • Proof of Identity - PAN Card, Aadhaar Card, Passport, Driving License, Voter ID Card, Employee Identification Card.
  • Residential Address Proof - Utility Bills (water, electricity), tax paid receipt bill, Passport, Aadhaar Card, Voter ID Card.
  • Education Qualification Certificate.
  • Income proof of self-employed - Recent 6 months bank statement, audited financial report for the last three years.
  • Proof of Business - GST Registration Certificate, Certificate of Practice, Shop Act License, Partnership Deed, Qualification Certificate, MOA & AOA.
  • Income Tax Returns details for the last 3 years.
Prepayment of Loan Against Property

Prepayment of Loan Against Property

The loan against property comes with an attractive feature of prepayment (part payment) option which provides an opportunity for the borrower to repay some part of loan amount during the loan tenure (higher than regular EMIs in lumpsum).

As per the RBI guidelines, for individual borrowers who have availed loan under floating interest rates, no prepayment charges should be levied. But for corporate firm prepayment charges are still levied but is minimal.

The option of prepayment of loan helps to bring down the total outstanding principal amount which in turn will also reduce the interest rates over a period.

GoodReturns.in

Read more about: property loan
Story first published: Tuesday, September 8, 2020, 21:01 [IST]
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