5 Essentials of Loan against Property You Can?t Avoid

Posted by Anurag Mishra on March 23rd, 2017

Availing a loan against property (LAP) has become quite easy these days. The procedure can be completed online on websites. However, as an applicant for LAP, you must be aware of certain criteria to make sure the entire loan procedure happens smoothly.

Here are some aspects to checkout before applying for a loan against home with a bank or financial institute.

1. The Property Value

Whether you intend to apply for a loan against property on residential or commercial estate, you must know the monetary worth of the property in question. Suppose you need a loan amount of rupees 40 lacs, but the estate’s current market value is only INR 35 lacs, then getting entire amount of INR 40 lacs as loan, is impossible on the concerned property.

The loan amount sanctioned cannot be more than the property’s value. But, you can get up to 70 to 90% of property’s market value as loan. If your loan requirement is higher than the property’s cost, then other financing options have to be considered in combination.

In the above case scenario, however, you may be eligible for a lower loan amount, depending on the income you obtain.

2. Income & Repayment Ability

LAP is majorly taken when there is a requirement for large amount of money. The mortgage loan approval will depend on your monetary income, and repayment ability. Depending on the income, and EMI scheme suitable, repayment tenure will be decided, which is maximum up to 15 years. You must draw a comfortable income in order to take care of loan against home payments.

The reason why banks are serious about the applicant’s income status is because a person with regular income will be able to pay the EMIs consistently, than defaulting in its payments. So the bank does not have to worry about selling the pledged property to recover the LAP amount, which would otherwise take intensive time and efforts.

3. Co-applicant for Mortgage Loan

If you alone cannot fulfill the income or repayment capacity essential for getting loan against property sanctioned, then you may be able to bring in a co-applicant. The loan providing institute will run a check on the co-applicant to confirm if he/she and you together can repay the mortgage loan amount or not.

4. Real Estate Ownership

If you are the sole owner of the property, then there must be no problem in acquiring a loan against the same. If there are co-owners who do not agree with your decision of applying for LAP, or the property is disputable with necessary documentation out-of-place, then the mortgage loan can be rejected.

5. Know the Fees Involved

Apart from the LAP interest rates, there could be other charges such as loan processing fee, pre-closure charges, sales tax, agent cost and more. You must acquaint with all these charges or fees that have to be paid for, when applying for a loan against home.

{Source: http://blog.loanbaba.com/5-essentials-of-loan-against-property-you-cant-avoid/}