A Commercial Property Loan means borrowing funds against your commercial property. It is an affordable means of getting funds for meeting various financial obligations. Since you are offering your property as collateral against the loan, there is no restriction on how you use the loan amount. That makes it an attractive proposition for the borrowers. For example, you may even use a Commercial Property Loan to fund your child’s higher education, wedding, or any other personal expense. Depending on your circumstances and age; you may enjoy a repayment tenure of up to 15 years on your Commercial Property Loan.
The basic requirement to avail of a Commercial Property Loan is that you must have a commercial property. It could be a commercial premise, shop, manufacturing unit, or office. The criteria would vary from lender to lender. The commercial property you own will be mortgaged to get the loan. Your commercial property is collateral, against which you get a loan.
Loan to Value (LTV)
Loan to value (LTV) refers to the amount of loan you can get against your commercial property. Compared to residential properties, the LTV of commercial properties is much lower. Generally, your Property Mortgage Loan would be 60% to 75% of the property value. For example, if the property value of your commercial premise is ?3 crores, you can avail of a ?1.50 crore to ?2.10 crore loan, depending on the lender and your repayment capabilities. Most lenders have an online calculator for calculating LTV. It will help you determine the probable loan amount you can get.
The repayment tenure is up to 15 years. It would again depend on several factors such as:
Since a Loan Against Commercial Property is a secured loan, the interest rates are lower compared to a Personal Loan, Education loan, and the like. The interest received would depend on various factors such as -?
You must fulfill the following criteria to be eligible for a Commercial Property Loan:
Also Read :- How to get a loan against commercial property?
All the major lending institutions would offer the Loan Against Property on similar terms, yet not all lenders are the same. You need to carefully consider the loan terms before finalizing the lender.? Here’s are few important points that you must consider while choosing a lender for Loan Against Commercial Property:
Rate of interest
This is paramount when considering a Commercial Property Loan or any other loan. Even a marginal difference in the interest rate can make a huge difference to the total outgo. Therefore, do some math, and compare the interest rate offered by various financial institutions before finalizing the lender.
While all the lending institutions follow RBI guidelines including the upper limit for lending against commercial property, the actual property assessment is done by the lender. So, it is quite likely that lenders will differ on two counts:
1. Property valuation
2. Loan to value (LTV)
The LTV ratio ranges from 50% to 70%, depending on the lender’s policy and your financial position. The higher the LTV ratio of a lender, the more the loan amount you will get. Therefore, one needs to go with a lender with a higher LTV.?
Some financial institutions may charge a penalty for pre-payment of loans. Generally, borrowers may repay the loan amount in advance to save interest charges for the balance of loan tenure. However, in that case, you must consider the prepayment penalty as it will add to your overall cost.
You would be required to pay certain charges, broadly termed as processing fees. It would include registration fees, legal expenses, brokerage, loan assessment charges, and the like. This would increase your cost burden. The processing fee would be in the range of 1% to 2% of the loan amount. Specifically, ask your lender as to what you would be required to pay over and above the interest charges. Also, go through the fine print before you sign on thos dotted lines.
Applying for a Loan Against Commercial Property is easy. You may either visit the nearest branch of the bank or financial institution or apply online.
Applying for a Loan Against Property is a massive undertaking since you will be capitalizing on your property for the loan. Hence, finding the best lender is of utmost importance. Now that you know all about Property Mortgage loans, go ahead and find a reputed lending institution that offers Loan Against Property on extremely favourable terms.
Availing a personal loan might seem challenging due to stricter underwriting policy by lenders because of the unsecured nature of the product and the possibility of future Covid-19 waves.
Have you ever come across the financial term Loan against property? Did it make you wonder what does it mean and how is it different from Home Loan?
A loan against property or LAP can be an excellent alternative to a personal loan. It can help you access finances in the hour of need and meet your various financial requirements.
A loan against property or LAP is a secured multi-purpose loan given by lending institutions like a bank or non-banking financial institution (NBFC) to a borrower in exchange for holding their property as collateral.