What is Mortgage Loan

In general terms, a mortgage loan is a loan that is available on mortgaging an asset. However, a mortgage loan is specifically used in the context of a loan availed against a high value asset like a commercial/residential property, land or any immovable asset like heavy machinery, etc.

A mortgage loan comes in handy when you are in need for a bigger sum of money. While unsecured loans like personal loans may not fit the bill here and other loans like home loans, auto loans, etc can be availed only for that particular purpose, a mortgage loan will work very well here.

Some of the expenses that you can meet with a mortgage loan could be the construction of another property, meeting education or wedding expenses, expenses towards setting up a business, or even paying off another higher interest loan. The best thing with a mortgage loan is that often, you are allowed to withdraw only the amount that you require and the interest is charged only on that portion.

Advantages of a Mortgage Loan

Making Best use of An Illiquid Asset
You can put an illiquid asset like a property to good use and avoid taking out high interest loans.

Getting Higher Amount of Loan
Higher amounts of loans can be available for those who need it. The value of the loan is based on the value of the property offered for mortgage.

Extended Period of Loan Repayment
Mortgage loans can extend for 20 years which gives you a longer term loan and the ease of managing your finances easily.

Simple Documentation
The documentation needed for a mortgage loan is pretty simple in comparison to other loans.It is often limited to KYC documents and ownership papers for your property.

Flexibility in End-use of the Loan
The proceeds of a mortgage loan can be used for any purpose, just like a personal loan. One loan could meet many purposes.

Available Even with Low Credit Scores
A mortgage loan is available even on low credit scores, as there is an asset which is mortgaged to avail the loan

Access to Income Tax benefits
If you use the mortgage loan for starting a business or meeting business expenses, interest paid on the loan is considered as a tax deductible expense. You can claim the benefit of payment of interest on this loan even if you purchase another residential property with the loan.

How Can You Avail Yourself of a Mortgage Loan?

You can get a mortgage loan easily from any bank or a Non Banking Financial institution. You could approach these banks personally and talk to them about their interest rates and other associated charges.

  • You would then need to submit the application for the loan along with other documents like KYC and your documents for the property.

  • The lenders would carry out the verification of authenticity of your documents to establish ownership of your property. A clear property title can make the loan processing easier.

  • A physical verification of the property is also carried out to assess the market value of the property.

  • A loan value to extent of 60-75% of the property value is then fixed.

  • The sanctioned loan value is then disbursed.

  • Certain lenders allow you to avail the loan in parts as per your requirements. This can help you save on interest paid on the loan.

Points to be Kept in Mind Before Going in for a Mortgage Loan

As with any loan, you would 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 it may restrict your ability to avail loans in future.

  • If you do not pay back your loans on time, you may end up losing your mortgaged property.

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