According to the reports of leading financial service, the mortgage loan portfolio of leading financial institutions have registered a 7% year-on-year growth in FY 2020-21, till September 2020.
The low-interest rate, high loan amount, and extended tenor are some of the highlights of a loan against property. Along with that, easy eligibility criteria, and no end-use restriction further increase the convenience of borrowers. Nevertheless, before going ahead with the application process, here are some facts that one should know about this method of financing.
4 facts to know about Loan Against Property
1) Floating rate of interest is applicable
There is a misconception that loan against property interest rates is fixed. However, the reality is quite the opposite. Nowadays, lenders levy a floating rate of interest on this financing method.
The rate of interest, however, alters from one lender to another hence, borrowers can check with their choice of financer before applying for an advance.
2) Co-applicants for jointly owned property
In case a property has more than one legal owner, then a LAP application must include the name of all parties. It will help financial institutions to comprehend whether all parties have agreed to it or not, and avoid any future complications.
On the other hand, one can include his/her spouse or children in a LAP application to improve eligibility.
3) No tax exemption
Unlike other mortgage loans like home loans, there are no tax exemptions available on the repayment of loan against property. However, if debtors use the borrowed funds for the renovation of their house, or in any improvement of their existing property, then they can claim tax benefit on that.
4) For already mortgaged property
One myth about loan against property that must be put to rest is that one cannot take another advance on a property for which he/she is already paying housing loan EMIs. However, there are certain limitations such as, borrowers can only apply for a loan against property after paying-off their other mortgage loan for a particular period.
Additionally, the following factors can influence one’s ability to avail a LAP –
a) From the time one has purchased a house through a home loan to the time of LAP, if the property value has increased, then individuals can easily opt for this financing method. The loan amount here will depend on the current market value of that property.
b) In case borrowers have made a substantial down payment previously and opted for a comparatively low credit amount. They can easily get a LAP of a higher value.
c) The repayment capacity and payment history also affect the loan against property eligibility. Borrowers who have not defaulted any payments and meet the monthly income criteria can easily avail of credit without any hiccups.
Apart from these, borrowers should also be wary of some pointers before applying for a loan against property:
- LTV ratio
- Loan tenor
- Eligibility criteria
- Documents
- Interest rates
- Processing charges
Along with these, one should also look for pre-approved offers that streamline the loan application process and saves time. It is applicable to financial products like home loans, loans against property, etc. Borrowers can check their pre-approved offer by submitting their essential contact details.
The customer-focused benefits of a loan against property account for a better borrowing experience. Furthermore, the high loan amount and absence of any restrictions on the usage of funds also help individuals to meet their financial emergencies without any delay.