Fulfilling any big-ticket expense, such as financing your child’s education, paying for a medical emergency, expanding your business, etc., requires substantial capital. However, raising finance to meet such expenses requires access to hassle-free credit facilities. In such situations, you can look at a credit financing option like Loan Against Residential Property to manage your financial requirements.
What is a Loan Against Residential Property?
A Loan Against Residential Property allows you to pledge your home to raise funds without giving up ownership or possession of the property. Also known as a property mortgage loan, this credit option is highly useful for individuals seeking high loan amounts to fulfil their financial needs. Read on to know more about the benefits of this product:
Benefits of Loan Against Residential Property
1. Competitive Interest Rates
The interest
rates for Loan Against Property are comparatively lower than
those of unsecured loans. As these loans are secured, the lender’s
credit risk is reduced significantly. This means that the lender may
offer a competitive interest rate on the loan. The mortgaged property
allows the lender to offer the loan at lower interest rates.
2. Ownership of the Pledged Property
Loan Against Property allows you to retain the ownership of the
property you have offered as collateral and reside in it throughout
the loan tenure. This feature benefits individuals having a single
residential property as they do not have to leave their homes while
repaying their loans.
3. Higher Loan Amount
A Loan
Against Property helps you procure a higher amount to finance any
expenses. In case you need substantial credit urgently, a mortgage
loan is an apt financing option. Note that the final loan amount
depends on your property’s market value, its age and condition,
location, the loan-to-value (LTV) ratio offered by the lender, etc.
4. Flexibility in End-use of Funds
Availing of a Loan Against Property allows you to use the funds for
any personal or business-related purpose. You can use the loan
amount to pay for emergency medical expenses, consolidate existing
debt, finance your wedding costs, raise capital for your business,
etc.
5. Longer Repayment Tenure
A
property mortgage loan comes with higher repayment periods compared
to most other credit instruments. The advantage of a longer tenure
is that it allows you sufficient time to repay the loan. A higher
tenure also leads to lower EMIs (equated monthly instalments), which
helps you pay off your debt over a longer term without straining
your finances. Poonawalla Fincorp offers a mortgage
loan against your residential property with a flexible repayment tenure.
Also Read: Things to Look Out for Before Applying for a Loan Against Property
Eligibility Criteria for a Loan Against Residential Property
Lenders offering a mortgage loan usually conduct an internal risk
assessment of your credit profile along with the physical and
technical/legal verification of your property to determine your
eligibility for a mortgage loan. Some of those important factors that
banks/NBFCs look at while assessing your eligibility are as
follows:
1. General Eligibility Conditions
• Credit Score: Having a good credit score (750 and above)
improves your chances of availing a Loan Against Residential Property.
As lenders consider your CIBIL score to evaluate your
creditworthiness, having a higher credit score may indicate that you
are a responsible buyer.
• Occupation Profile: Salaried
individuals, self-employed professionals and business owners can apply
for a Loan Against Property.
• Minimum Income: Lenders approve
loan applications of individuals who fulfil their minimum
monthly/annual income criteria.
• Age: Lenders have a minimum
and maximum age requirement for their LAP applicants.
• Work
Experience (for salaried applicants): Banks/NBFCs offering LAP usually
set minimum work experience requirements for salaried employees.
• Business Vintage (for self-employed applicants and business
owners): Lenders also stipulate that self-employed individuals and
business owners should be in the same business/profession for at least
a few years before they become eligible to apply for the loan.
• Citizenship: Individuals opting for a mortgage loan should have
Indian citizenship.
2. Property Eligibility Conditions
• Type of Property: The property should be residential
(Apartment, villa, independent house, etc.)
• Ownership: The
loan applicant must be the owner of the residential property that is
being pledged as collateral for the loan. In the case of joint
ownership, all the co-owners must be the co-applicants for the
loan.
• Legal Dispute: The property must not be involved in any
legal disputes.
• Property’s Age and Condition: Lenders also
consider the age and condition of the property to be pledged as
collateral. They usually require the pledged property to be up to a
certain age to sanction the loan.
Note that the eligibility
criteria mentioned above are only indicative in nature. Lenders may
consider additional eligibility conditions while assessing your loan application.
Documents Required for a Loan Against Residential Property
The documentation for a mortgage loan is usually the same across most lenders. However, the actual list of documents required for LAP may vary based on your credit profile, property type, location of the property, etc. Here is a list of documents that financial institutions usually ask for to process your loan application:
1. Personal Documents
• Proof of
Identity (any one): KYC documents, such as PAN card, Aadhaar card,
Voter ID Card, Driving license, etc.
• Proof of Address (any
one): Passport, electricity bill, rent agreement, etc.
•
Proof of Income: Loan applicants should usually furnish the
following income-proof documents:
o For salaried individuals:
Salary slips and/or bank statements (showing salary credit).
o
For self-employed professionals and business owners: Income tax
returns, Balance Sheet and Profit& Loss Statements.
2. Property Documents
Banks/NBFCs
offering a mortgage loan usually ask for the following documents as
residence ownership proof:
• Sales deed/agreement
•
Copy of tax registration
• Tax receipts
• Utility
bills (Electricity, gas, etc.)
Note that the above list of
documents is indicative in nature. Lenders may ask for additional
documents while processing your loan application.
Interest Rate for a Loan Against Residential Property
Lenders usually consider the following factors to set the
interest rate for salaried and self-employed loan applicants:
1. For Salaried Loan Applicants: Financial
institutions offering a mortgage loan to salaried employees consider
their credit score, income, occupation profile, employer profile,
the market value of the pledged property, etc., to decide their
interest rates. They usually offer lower interest rates to loan
applicants working in reputed private and public sector companies
due to reduced risk of potential default.
2. For
Self-employed Loan Applicants: Lenders consider the
income, CIBIL scores, repayment capacity, etc., of self-employed
individuals and business owners, along with the market value of the
pledged property, to finalise the interest rate for a mortgage loan.
Common Mistakes to Avoid While Applying for a Property Mortgage Loan
Some of the most common errors that you should avoid while opting
for a mortgage loan are as follows:
• Not comparing the
interest rates of multiple lenders
• Not opting for the right
loan tenure
• Not reading the terms and conditions before
applying for the loan
• Ignoring your credit score
•
Failing to prepare a proper repayment plan for your loan
How to Apply for a Loan Against Residential Property from Poonawalla Fincorp
As one of India’s most trusted financial institutions, Poonawalla
Fincorp offers a Loan Against Property with an easy loan application
process and quick approval. You can apply for the loan through both
the online and offline modes:
1. Applying for the loan
through online mode
Step 1: Visit Poonawalla
Fincorp’s website and click on the ‘Apply Now’ button.
Step 2:
Click on ‘Loan Against Property’ under the ‘Select the Type of Loan’
option.
Step 3: Select the type of applicant between
‘Individual’ and ‘Firm or Company’.
Step 4: Enter basic KYC
details, loan amount, tenure, type of property, etc. and upload all
the required documents.
Step 5: Await the assessment and
verification of your loan application.
Step 6: Post
confirmation, you will receive the loan offer
Step 7: Approve the
offer and authorise loan disbursal
2. Applying for the loan through offline
mode
Step 1: Visit Poonawalla Fincorp’s nearest
branch.
Step 2: Fill out the application form and submit the
necessary documents.
Step 3: Await the assessment and
verification of your loan application
Step 4: Post confirmation,
you will receive the loan offer
Step 5: Approve the offer and
authorise loan disbursal
Also Read: What is a Property Mortgage Loan? Meaning, Definition, and How it Works?
To Conclude
Availing of a mortgage loan against your residential property helps you leverage your property’s value to manage your big-ticket expenses. With benefits like high loan amount, no end-use restrictions, high repayment tenure and continued ownership of the pledged property, you can meet your long-term financial obligations easily without increasing your financial burden. Apply for a Loan Against Residential Property from a trusted financial institution like Poonawalla Fincorp with simple eligibility criteria, no hidden charges and swift approval.
Frequently Asked Questions
1. Is having a co-applicant mandatory for availing
of a Loan Against Residential Property?
Having a
co-applicant for the loan is mandatory when more than one person
owns the property. In such cases, all the property owners are the
co-applicants for the loan.
2. What is the main difference between a loan
against residential property and a home loan?
While a home loan helps individuals borrow funds for the purchase/
construction of a new house or renovate their existing home, a loan
against residential property enables you to raise finance by
pledging your existing residential, commercial or industrial property
as collateral.
3. What is the minimum credit score required to
avail of a property mortgage loan?
While the
minimum credit score required for LAP depends on the individual
lender’s eligibility criteria, having a credit score of 750 and
above improves your chances of availing of the loan at lower
interest rates and favourable loan terms.