Loan Against Property, also referred to as a mortgage, is used by existing property owners to raise funds to buy real estate, finance an SME Organization, or Equipments or to raise funds for any purpose while putting a lien on the property being mortgaged.
Loan against Property for a purchase or a refinance is usually not a standalone transaction; there are many other things for a Person to think about. Yes loan officers can offer many programs to their clients, but it is also important for borrowers to be aware of their financial situation in a holistic manner.
As this is secured loan, interest rates are low when compared with unsecured loans like personal loans.
Need to finance your child’s higher studies or your personal Startup, the money already exists in your house. You just need to explore it.
Simply, all the loans can be categorized in two forms: secured and unsecured. Credit card and personal loan are examples of unsecured loans while housing loan, loan Against Property and car loan are secured loans.
When should someone start looking for a Loan Against Property?
If you are looking for a loan for a medium term (say, a few years) and have either your House or a Commercial Property in the form security, Loan Against Property is the lowest cost option available. If you are looking for loans for a very short period, say a few days or a few months, gold mortgage loans offer better option.
Here are few advantages of Loan Against Property:
Loan Against Property have plenty of benefits. We are providing you few of them:
- You can get up to 80 % of market value of your property
- Interest rates on Loan against Property are significantly lower than personal loans, but slightly higher than home loans. Usually Loan against Property interest rates range from 11.5% to 14%.
- Loan against Property are processed faster than other loans. These applications can be processed within 7 to 10 days once all loan documents are in place
- Some pre-prepayment (typically 25 % to 90%) is allowed in a year without any charges. So, in case you have surplus money, you can always prepay your loan and lower your interest burden
- If you are an individual borrower, there is no penalty for making full prepayment or foreclosure. However, if you are borrowing in the name of a business entity, prepayment charges typically apply
- Also if you need some more money, and in case the existing loan amount is less than 40-50% of value of the property, top up loan is always possible. This is a very helpful feature for many businessmen.
It also comes with few disadvantages:
- Maximum Loan to Value (LTV) is capped at certain percentage for residential property and for commercial property as well. This means that banks won’t give 100% of value of house property or commercial property as loan. Note that the value is typically taken as market value and not registry value or circle rate value.
- You might need to pay processing charges which will be a fraction of percentage of the loan amount when availing a Loan against Property.