mortgage loan

What is Property Mortgage Loan? Meaning, Definition, and How it Works?

October 20, 2022 • 8415 views

A Property Mortgage Loan or Loan Against Property is a secured loan that can be availed against your property. If you face any unexpected expenses, you can use the loan amount to meet any of your financial requirements. This financing method grants you immediate access to funds without any restrictions on their use, offering competitive interest rates and extended repayment periods. Read on to understand what a Property Mortgage Loan is and how it works.

What is a Mortgage Loan? 

A Mortgage Loan is a type of secured used for purchasing or maintaining real estate properties such as house, land plots, or other types of real estate assets.

Under this arrangement, the borrower commits to repaying the lender over a specified period, usually through a series of regular payments covering both principal and interest. The property itself acts as collateral to secure the loan.

To obtain a mortgage, a borrower must initiate the application process with their chosen lender and ensure compliance with various requirements, which often include meeting minimum credit score criteria and making initial down payments.

Mortgage applications undergo thorough underwriting procedures before progressing to the closing stage. Different types of mortgages, such as conventional or fixed-rate loans, are available to cater to the diverse needs of borrowers.

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How Do Mortgage Loans Work?   

Both individuals and businesses use mortgages to acquire real estate without the need for an upfront payment of the entire purchase price. Through this arrangement, the borrower gradually repays the loan alongside accrued interest over a predetermined period until they achieve full ownership of the property.

Most conventional mortgages follow a fully amortised structure, wherein the regular payment remains constant while the proportions allocated to principal and interest vary with each instalment throughout the loan's lifespan. Typically, mortgage terms span either 180 or 360 months. Follow these steps to have a comprehensive understanding of how you can avail a Mortgage Loan:

  • Step 1: Research all the potential lenders.
  • Step 2: Verify if you meet all the necessary eligibility requirements.
  • Step 3: Determine the loan amount and tenure.
  • Step 4: Apply for the loan.
  • Step 5: Wait for the property inspection to be conducted, as it is pledged as collateral.
  • Step 6: Wait for the loan approval and the subsequent disbursal process.
  • Step 7: Repay the complete loan amount to the lender in agreed instalments.

Types of Mortgages 

Here are the different types of Property Mortgage Loans:

  • Loan Against Residential Property

A financing avenue that has witnessed a surge in popularity in recent times is the Loan Against Residential Property. This financial instrument empowers homeowners to leverage the equity in their residences as collateral to secure loans for diverse purposes.

  • Loans Against Commercial Properties

For owners of commercial real estate, such as office buildings or retail stores, Loans Against Commercial Properties present a viable option. These loans enable individuals to use their commercial properties as security to obtain financing for various business requirements. 

  • Loan Against Industrial Property

A Loan Against Industrial Property allows borrower to harness the value of their industrial properties. This funding solution provides the means to undertake projects necessitating substantial financial resources. Whether it is upgrading facilities or investing in new ventures, leveraging industrial property can unlock capital for significant endeavours.

Also Read: Decoding the concept of Loan Against Property (LAP)

Benefits of Mortgage Loan

Here are some of the top benefits of getting a Mortgage Loan in India:

  • Higher Loan-to-Value Ratio: Your property can help you enjoy a high loan-to-value (LTV) ratio as per its market value, allowing you to fulfil any of your goals with the amount received.
  • Hassle-free Loan Processing: Loan processing has never been easier as you get to easily apply for a Mortgage Loan online and fulfil the basic eligibility criteria. You only must furnish the required documents to avail of a loan.
  • Minimum Paperwork: You do not have to worry about endless paperwork while applying for a loan. Simply provide basic documents required by the lender to save time.
  • Competitive Interest Rates: Get the best funds against your property at reasonable interest rates that allow you to pay off your EMIs without burning a hole in your pocket.
  • Transparent Loan Processing: Most lenders have a transparent loan processing system that informs customers of all applicable charges, and no hidden costs are involved.
  • Long Repayment Tenure: Some Non-banking Financial Companies (NBFCs) like Poonawalla Fincorp offer long repayment tenure on Mortgage Loans or Loan Against Property that can extend up to 15 years.
  • Diverse Product Categories: You can avail of a Mortgage Loan for any kind of asset, including properties that are residential, commercial, warehouse, or industrial.

How Does Your Mortgage Impact Your Credit Score?

The impact of a Mortgage Loan on your credit score depends on your repayment conduct. To maintain or improve your score, ensure timely repayments. In case you default on your loan repayment, your credit score can drop massively, making it challenging for you to improve it or get approval for a new loan.

How to Compare Mortgages?

To effectively evaluate mortgage options and secure the most favourable deal, follow these steps:

  • Step 1: Identify the Appropriate Mortgage Type

Before starting on your search for mortgage offers, assess which type of mortgage aligns best with your current financial situation and long-term objectives.

  • Step 2: Gather Essential Documentation

Once you have determined the suitable mortgage type and term, gather the necessary documents showcasing your income, investments, debts, and other financial details.

  • Step 3: Compare Mortgage Offers Online

With your documentation in hand, initiate the comparison process by exploring mortgage offers online. Additionally, approach your current bank and other financial institutions where you hold relationships, as they may extend the best deals to existing clients.

  • Step 4: Evaluate Loan Estimates

Review the loan estimate, an official three-page document delineating crucial figures related to your loan. This includes the loan amount, quoted interest rate, closing costs, prepaid interest, third-party fees, escrow expenses, and estimated monthly payments.

Also Read: Minimum CIBIL Score Required for Loan Against Property

What is a Mortgage Payment?

The monthly Property Mortgage Loan payment typically comprises four components: loan principal, loan interest, taxes, and insurance. If you are a first-time homebuyer, you might find it surprising that a mortgage payment entails multiple elements.

However, consolidating these costs into a single monthly payment simplifies financial management. Rather than juggling separate bills and due dates, your lender streamlines the process, ensuring timely and complete payment of these expenses.

Apply for a Mortgage Loan with Poonawalla Fincorp

When looking for a Loan Against Property, Poonawalla Fincorp emerges as a top financial institution in India. Here are the steps you need to follow when applying for a Mortgage Property Loan:

  • Step 1: Online Application

Initiate the process by clicking on 'Apply Now' and providing your contact information, desired loan amount, tenure, and property type.

  • Step 2: Important Information

Input your date of birth and details regarding property ownership. Enter information about your occupation and employment status.

  • Step 3: Verification

Upload the documents and submit the application form. The application undergoes verification and assessment procedures post-submission.

How to Check CIBIL Score for Free?

Follow these steps to check your CIBIL score for free:

  • Step 1: CIBIL Score

Select the 'Get Your CIBIL' button and fill out the CIBIL Check form, specifying your employment type and gender.

  • Step 2: Personal Information

Enter your name, contact details, PAN card number, and address proof as required.

  • Step 3: Terms and Conditions

Review the terms and conditions, agree to them, and proceed by clicking the submit button.

  • Step 4: Verification

After submission, your CIBIL score will be promptly provided. You can then download your CIBIL report for further reference.

To Conclude

A Mortgage Loan offers a reliable solution for handling unexpected financial needs. Whether it is financing higher education, embarking on a dream vacation, or organising a memorable wedding, a Loan Against Property provides the flexibility to address diverse monetary requirements.

Additionally, its straightforward eligibility criteria streamline the borrowing process, ensuring a hassle-free experience for borrowers. Poonawalla Fincorp is a trusted financial partner of thousands of customers. Avail a Property Mortgage Loan or Loan Against Property from Poonawalla Fincorp and fulfil all your urgent financial needs.     

Frequently Asked Questions

  • Can I pay off my loan against s property early?

Yes, you have the option to foreclose your loan account. However, it is important to note that certain financial institutions may levy a fee for pre-closure. Therefore, it is advisable to inquire about any associated charges before proceeding.

  • Do I need a high CIBIL score for a Mortgage Loan?

While a high CIBIL score is typically indicative of good credit behaviour and financial discipline, it is not the sole determinant for approval when applying for a Mortgage Loan or Loan Against Property. While a high score can be beneficial, other factors also come into play during the approval process.

  • What types of properties can be used as collateral for a Loan Against Property?

Most banks accept residential properties (such as flats or houses) or commercial properties (including buildings or land with buildings) as collateral. Occasionally, you may also pledge non-agricultural land as security. However, it is important to note that industrial or agricultural properties typically do not qualify as collateral for a Loan Against Property.

 

Disclaimer

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

poonawalla fincorp team

Poonawalla Fincorp Team

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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