When in need of funds, redeeming investments is the first option that comes to mind. Although it saves the interest payments, it hampers an individual’s future savings and financial goals. In such a time, mortgaging a property can be a viable option for many.
However, before that, individuals should know the house mortgage meaning and its possible benefits are.
Reasons to take a mortgage loan
A mortgage loan in India is it is a secured loan that you get by keeping an existing commercial or residential property as collateral. However, your property should have no legal disputes and be fully constructed.
Here are many reasons why opting for a mortgage loan against your house is ideal:
No end-usage restriction
You might need funding to meet emergency medical needs, or you can fulfil your dreams of higher education or go on a trip. It totally depends on you what you want to do with the money.
Due to it being a mortgage loan, the rights of your property get transferred to the lender. However, you can still enjoy the occupancy in this property and even rent or lease out the property and earn income from it.
- Low-interest rates
Unlike a few unsecured loans, your lender is likely to offer you low-interest rates on your loan. The interest of mortgage loans is generally low because the risk factor is less. Although, borrowers should know the other factors that affect the interest for LAP before finally availing of one.
Flexible repayment tenors
The repayment tenor of a loan against property is generally higher and can extend up to 20-25 years, depending on the lender. So, if you have pre-existing loans and you are already paying EMIs, you can opt for this loan with a long repayment tenor.
High loan corpus
The lenders will typically offer you 50-70% of your property’s current market value. So, if you have a high-value property, there is no better way to utilize it.
Easy and quick process
After submitting the documents required for loan against property, and the duly signed application form, borrowers can expect the financial institutions to start the loan process. First, however, the lenders will conduct a verification process where your documents, loan repayment capacity, property valuation, etc., will be examined. The process is not a very complicated one and thus is a quicker option compared to other types of loans.
Your property’s value will keep increasing over time, and you can increase your loan amount if needed at this time. This facility is known as refinancing and helps you get the maximum benefit from your property as collateral. Moreover, this process involves fewer formalities.
These are the possible factors why mortgaging your property for a loan can be worth it. However, one factor you must remember while mortgaging your property is that if you fail to pay the EMI or default on a loan, the lender has the right to sell your property to derive the due amount. If any amount remains due after selling the property, the lender will ask you to pay it. Therefore, if you have only one property, it can be a bit risky to keep it as collateral.
Nonetheless, leading financers extend customized offers to their borrowers on several financial products like home loans, loans against property, etc. These offers simplify and streamline the loan application. Existing mortgage loan borrowers can check their pre-approved offers by entering their names and contact details on the website of the lending institutions.
Now that you know the house mortgage meaning and its possible benefits and drawbacks consider the given points to understand if the loan is worth it. If you are confident about your repayment capacity and have a secondary commercial or residential property, you should opt for a mortgage loan. In addition to that, check and compare interest rates, and calculate your EMIs before applying for the loan. This will help you make an informed choice and choose the best lender.