Everything you Need to Know about Loan Against Property

A loan against property is a secured financing option extended on the premise of submitting a property as collateral. Even though the popularity of mortgage loans has amplified in recent years, it entails several factors that one must remember. Therefore, it is ideal for applicants to consider these factors before applying for this credit instrument and make a knowledgeable decision.

Points to remember before applying for a mortgage loan 

LAP loan allow individuals to meet an array financial objectives, however, one should keep in mind the following factors before applying –

• Interest rates and tenor

The first point to evaluate before applying for a LAP is its interest rate. Since loan against property interest rates varies from one lender to another thus, it is vital to compare the interest rates before selecting an institution.

Along with the interest rate, one should also consider the loan tenor. A point to remember here is that the rate of interest on a LAP is directly proportionate with tenor. Therefore, with an extended tenor, the interest will increase and vice versa.

• EMI

Along with interest rate and tenor, one should also consider the EMI payable against a loan application. Evaluating it beforehand helps you to plan your finances accordingly and avoid defaults, which can affect your credit profile.

• Eligibility criteria

The next point to evaluate here is the eligibility criteria for LAP, which is different based on an individual’s employment type. Here are the details –

1. Salaried individual 
   1. Must be an Indian resident
   2. Working in any MNC, private or public limited company
   3. Between 28 to 58 years of age
2. Self-employed individual 
   1. Must be an Indian citizen
   2. Between 25 to 70 years of age 
   3. Should have a stable source of income from the mentioned business

These factors are mandatory and will play a pivotal role in the approval of a loan against property application. Therefore, ensure that you meet the set eligibility criteria, without fail. However, a point to note here is that, these eligibility criteria differ from one lender to another. 

• Documentation required 

Beside the eligibility parameters, one should also take into consideration the documentation of a loan against property. Similar to the eligibility criteria, the documentation requirement also depend on the NBFC you are applying from. However, here is a general list of documents that you must present, irrespective of a lender –

1. Salaried individual 
   1. KYC papers
   2. Address proof
   3. Latest salary slip
   4. Bank account statement of the last 3 months 
   5. Copy of property documents to be placed on mortgage 
   6. IT returns documents
2. Self-employed individual 
   1. KYC details
   2. Address proof
   3. Bank account statement for the last 6 months
   4. Income tax papers
   5. A copy of property documents to place under mortgage

Besides these documents, applicants need to submit any additional papers that a lender may ask for.

• Loan-to-Value ratio 

Loan-to-value ratio or commonly known as LTV denotes the loan amount available against the total property value. This ratio is represented in percentage format, and it differs from one financier to another.

For instance, if a lender is offering LTV of up to 70%, then against a property of Rs.1 crore, you can get a maximum loan amount of Rs.70 lakh.

Thus, conduct a thorough market survey of the different loan-to-value ratios offered by the NBFCs before applying.

• Pre-approved offers

Another point to check before applying for a property loan is the availability of pre-approved offers. These offers streamline the loan application process and saves time. Borrowers can now check their pre-approved offers online.If you keep these pointers in mind, then applying for a loan against property shouldn’t be too difficult.