Several financial institutions offer secured loans known as loans against property (LAP) against both commercial and residential properties. By mortgaging properties, they own, people can use these funds for many different purposes.
Here, we are going to talk about the things to consider before taking a loan against property in Mumbai. Read on to know more about the same.
Top 6 considerations before applying for a loan against property in Mumbai
Here are some crucial things one must keep in mind before applying for a mortgage loan:
- Principal loan amount
The principal loan amount is based on the value of the property that is mortgaged. The total amount borrowed will never exceed the current market value of the property being mortgaged. However, the principle of the loan may change depending on the applicant’s employment type.
- Loan against property interest rates
A lending institution determines the property loan interest rate, which is influenced by a borrower’s income, credit history, principal loan amount, and other factors. However, one must know that these interest rates tend to vary from lender to lender. Willing applicants can use a loan against property calculator to determine the precise monthly instalments even before applying for a loan against property.
- Eligibility parameters
The requirements for qualifying for a loan against property vary depending on the lender. Only those applicants eligible for LAP may apply. An applicant’s age, employment situation, income, credit history, nationality, etc., are among the criteria for eligibility. Applicants must make sure they meet the requirements and minimise their risks of loan application rejection.
- Loan repayment tenor
Financial institutions offer loan against property for a tenor of 15 years, but it can go up to 30 years at its longest. Since the EMIs are lower, a longer tenor helps reduce the chance of defaults. But once more, as the interest rate is compounded, a long tenor likewise increases your overall expense. Therefore, it is advised that applicants calculate their monthly payments for both short and long tenors using the loan against property interest rate calculator to have a precise estimate of the total amount due at the end of the tenor.
- Additional charges
Loan against property has additional fees based on the lending institution, such as:
- Processing fees
- Penalty charges
- EMI bounce charges
- Statement charges
- Stamp duty charges
- Mortgaging fees
Therefore, it is wise to compare lenders and take these additional fees into account when applying for a loan against property.
- Tax benefits
Only the interest paid for a loan against property is tax deductible. Eligible candidates can claim tax exemptions under 37(1) and section 24(b) of the Income Tax Act of 1961.
Eligibility criteria and documents required for a loan against property
In order to meet the eligibility for loan against property, applicants must meet the following criteria:
- Applicants must be an Indian resident
- Salaried applicants must fall in the age group of 28 to 58 years old and self-employed applicants must be between 25 to 70 years of age
- Salaried individuals must have at least three years of work experience in MNCs or private or public sector companies
- Self-employed candidates must be able to prove a stable source of income
That said, here is a list of documents that an individual needs to produce in order to opt for a loan against property in Mumbai:
- Latest salary slips (for salaried applicants)
- Last three months’ bank account statements
- Aadhaar card and PAN card
- Address proof
- IT returns (for salaried individuals)
- Copy of the documents of the mortgaged property
In addition, there are several financial institutions in our country that extend pre-approved offers on secured credit products, such as loan against property, home loan, etc. These offers fasten the loan approval stage and allow quick disbursal of the loan amount. Eligible candidates can check their pre-approved offers by entering few details in the lender’s portal.
To sum it up, individuals looking forward to opting for a loan against property in Mumbai must keep the above-mentioned pointers in mind. This will help them reap the maximum benefits from this secured line of credit.