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How to Avail Loan Against Residential Property?
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.
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:
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
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.
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.
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.
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
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?
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.
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.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan Against Property disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply
Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.
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