Mortgage Loan
Homeowners or property owners looking for quick funds can mortgage their property to finance their necessities. Read more to understand mortgage loans, their features, types, and the best bank for mortgage loans.
What Is A Mortgage Loan?
A mortgage is a loan taken out against a property that you own. The property could be your home, a shop, or even non-agricultural land. A mortgage loan may be taken from any type of lender, from banks to non-banking finance companies.
The lender provides you with the principal amount and charges you interest on it and you can repay this amount in affordable monthly installments.
A mortgage is a secured loan and your property is used as collateral. It remains in the lender's custody until the loan is fully repaid, so the lender has a legitimate claim to the property for the duration of the loan.
In case you fail to repay the loan, the lender has the right to seize your property and sell it at auction to retrieve the loan amount.
Why Choose Mortgage Loans?
Mortgage loans provide low rates of interest, help you get your dream house, and aid in increasing your credit score. Both individuals and businesses can take mortgage loans to purchase real estate.
In India, mortgage loans are not as popular as they are in other countries. Instead, Indians opt for a home loan.
Types of Mortgage Loans
The different types of mortgage loans are as follows -
Fixed Rate Mortgage Loans
Fixed-rate mortgages are offered to customers at a fixed interest rate. In these types of loans, the fixed interest rate can be used to calculate the monthly payment amount, giving the customer a fair sense of what his or her debt will be.
Variable Rate Mortgage Loans
Variable-rate mortgage loans are loans that are offered at variable rates of interest. The interest rate of these loans depends on the base rate of the lender, the repo rate of RBI, the economy, and the stock market.
Adjustable-rate Mortgage Loan
The interest rate is fixed for the initial period of the Adjustable-rate Mortgage loan. Thereafter, it changes depending on the state of the economy.
The higher the economy's performance, the lower this rate becomes. While banks offer a discount rate of interest for the initial period they charge a higher processing fee.
Simple Mortgage Loan
A simple mortgage loan is one where the property does not transfer from lender to borrower but the lender has the right to sell the borrower's property if he or she fails to pay back the loan.
Usufructuary Mortgage Loan
Usufructuary mortgages allow the borrower to sell the property to the lender for an income that can then be used to compensate both principal and interest on the loan.
Subprime or Sub Mortgage Loan
A subprime mortgage loan is extended to individuals with a low credit score, hence comes with a higher interest rate. The high rate of interest protects the lender in case the borrower defaults on the loan.
English Mortgage
Under the English mortgage, the borrower consents to give the lender complete ownership of their property if they are unable to make their loan payments by a specific date. The property is again given to the borrower after the full sum has been paid.
What Is The Rate Of Interest For Mortgage Loan?
Mortgage loan interest rates in India depend on the lender offering the loan. We have compiled a list of best banks for mortgage loans in India.
| Bank | Processing Fee | Interest Rate |
|---|---|---|
| ICICI Bank | 10.85% onwards | 1% |
| Indiabulls | 10.45% onwards | 1.25% onwards |
| Axis Bank | 10.50% onwards | 1.00% |
| PNB Housing Finance | 9.24% onwards | 0.75% |
| IndusInd Bank | 9.00% onwards | 2% |
| LIC Housing Finance | 9.70% onwards | 1% |
| Bajaj Finserv | 9% onwards | 3.54% |
| Kotak Mahindra Bank | 9.15% onwards | 1% |
| IIFL | 10.75% onwards | 2% |
| Tata Capital | 10.10% onwards | 1% |
| OBC | 0.50% | 10.95% |
| Union Bank of India | 0.50% | 11.50% |
| Karur Vysya Bank | 0.50% | 12.15% |
| HSBC Bank | 1.00% | 9.80% |
| Indian Overseas Bank | 0.62% | 10.85% |
Please note that the mortgage loan interest rates and processing fees given above are for informational purposes only. We request you to contact the lender directly to know the interest rates and processing fees associated with their mortgage loan products.
Features and Benefits of a Mortgage Loan
A mortgage loan has many features and benefits. Some of them are -
- Lenders prefer fully constructed properties and have the right to reject a property
- Property used as collateral needs to have commercial value and be a freehold property, which means it can be transferred to a new owner
- Mortgage loans come with lower interest rates and longer tenures, lasting decades in a few cases, with flexible repayment terms
- You can customize your mortgage loan according to your needs
- During the course of repaying the loan, you remain the legal owner of your property
- The features and benefits differ from bank to bank. Contact the lender for more details on mortgage loans.
Eligibility Criteria For a Mortgage Loan
The mortgage loan eligibility criteria depend on the banks providing the mortgage loan. Banks decide who is eligible for the loan and who is not depending on many factors, such as -
Age
Mortgage loans are offered to individuals aged 21 and above and not older than 65 years.
Monthly Income
Lenders prefer borrowers with a minimum monthly income whether they are salaried or self-employed.
Nationality
Most lenders only extend mortgage loans to Indian citizens.
Credit Score
Lenders prefer borrowers with a good credit history and a credit score of 750 and above. Borrowers with lower credit scores will incur higher interest rates.
Documents Required for Mortgage Loan Applicants
- Duly filled and signed copy of the application form
- Proof of identity documents such as a passport, Aadhaar, PAN, Voter ID, etc.
- Proof of address such as Aadhaar, Passport, Driver's License, Voter ID, etc.
- Form 16
- Salary slips for the last 6 months (for salaried applicants)
- Bank statements for the last 6 months
- Income Tax Return documents for the last 2 years (for self-employed applicants).
- Proof of business existence and certificate of business (For commercial borrowers).
Apart from the documents mentioned above, lenders might ask you for additional documents depending on their eligibility criteria, the loan amount, your overall profile, etc.
Please contact the lender directly to get an idea of the documents that you will need to submit along with your mortgage loan application.
Points to Remember Before Taking A Mortgage Loan
As with any loan, you have to bear in mind that availing a loan is a liability that you have to pay back within the mentioned period. Some of the points that you would have to pay attention to are:
- Although a mortgage loan may be available on a lower credit score, non-payment of EMIs regularly can further drag your score down.
- Mortgage loans are big-ticket loans, so they may restrict your ability to avail loans in the future.
- If you do not pay back your loans on time, you may end up losing your mortgaged property.
Conclusion
Mortgage loans are loans given against property and are secured in nature. These loans are cost-effective, customizable, and hassle-free. The mortgage loan amount has no restrictions on the end use and the borrower can use the funds as they deem fit.
Mortgage Loan Related (FAQs)
At present, Moneyview does not offer mortgages or home loans. We only offer instant personal loans up to Rs 5,00,000 at attractive interest rates.
The difference between mortgage amortization and the term is that amortization is the time you will take to repay the full loan, and the term is the period for which your rate of interest and mortgage agreement will be effective. The term is part of amortization.
Prepayment is allowed on mortgage loans. However, some banks charge a small fee for the pre-closure of the loan.
No. It is not mandatory to have a co-applicant. However, it has several benefits.
Co-signer/co-applicant requirements vary from one lender to another. Contact your lender to know who can be your co-signer on the mortgage.