What is loan against property? How to apply for it?

Posted by Sarita Yadav on June 2nd, 2021

As the name suggests, Loan Against Property, i.e. loan against property, is a loan that is either owned by the applicant or by his guarantor, who is usually the parent. is given in exchange for the value of the property. This property is mortgaged, which means that the property papers and legal ownership of the property remain with the bank till the loan is repaid.

Features of Against Property

Loan Against Property or Mortgage loan has certain unique features that are different from other types of loans.

• It is considered a secured loan as it is provided against the value of an immovable asset such as a property.
• The purpose of this loan can be for both personal or commercial funding.
• The maximum amount that can be exchanged for a property is between 60% and 80% of the latest market value of that property. This ratio is called the loan-to-value ratio.
• For Loan Against Property, the property should be in the name of you or your co-applicant. It can be a residential or commercial property, but commercial properties undergo further scrutiny and scrutiny.
• The interest rates are very low as the property is mortgaged as the security of a home loan. This reduces the risk of default in payment on the part of the borrower.
• Banks offer the facility of a longer repayment tenure, which can be up to 15 years.
• Vacant land, as well as rented residential property, can also be taken hostage for taking a loan.

Loan eligibility

Although the main criterion for the loan is to have the property in the name of the applicant, most of the banks also ask for certain other eligibility requirements to be fulfilled which are as follows:

• You must be an employed person
• The minimum age limit is 23 to 25 years and the maximum age for repaying the loan is limited to 65 to 70 years.
• To ensure that you earn money to repay the loan
• Your financial status, credit score, and income are also examined to determine your eligibility

Benefits of taking a loan against property

Instead of taking a personal or gold loan, taking a loan against the property is a better option if you have a property. Following are some of the reasons why this type of loan is better for taking a large loan amount:

• You can use your property to take a loan without transferring your ownership
• Interest rates are much lower as compared to personal loans
• Since the value of the property is quite high, you can get a much bigger loan as compared to a personal loan because in the case of a personal loan you get a loan based on your income
• The time limit for repaying it is much longer, so you get a lot of time to repay it.

Things to note

Although money is easily available in a loan against property, before applying for such a loan, you should keep a few things in mind that the following are -

• If the property is in the name of more than one person then all the people will have to play the role of joint borrowers or co-applicants.
• Lenders consider the market value of your property, its age, and its condition before deciding your loan amount.
• When the property is mortgaged for a loan, you cannot sell it before clearing the outstanding loan.
• In case of default in repayment of the loan, the lender under the authorized jurisdiction has the right to seize your property, sell it and recover the balance amount of the loan.

Compare your options

One should think a bit about mortgaging your property and considering the options of lenders in the market nowadays, one should know and compare their options before finally choosing the lender. Different lenders offer different loan-to-value ratios, so try to choose the highest ratio to get the maximum loan. Also, take a look at the interest rate to avail the lowest rate and lowest EMI.