Mortgage loans are loans in which the loan company provides funding against the property to be purchased by the borrower. They are the most common financing options in India among all user classes, including business and retail borrowers. With mortgage loans, applicants can get sizable loan amounts at reasonable interest rates with flexible repayment terms.
Financial institutions offer different types of mortgages in India. Loan seekers can opt for one that best appeals to their requirements.
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Loan Against Property (LAP)
Also known as LAP, a Loan Against Property is a secured loan people take to buy a residential or commercial property. The borrower mortgages a property they own to get the required funds from the lending institution and pay it back in EMIs. They deposit the property’s original documents with the lender till they repay the loan in full. The loan tenure can be up to 15 years, and the borrower can use the loan amount for personal or professional purposes. Many financial institutions provide a Loan Against Property EMI calculator on their website to make calculations easier for borrowers.
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Commercial Purchase Loan
Commercial purchase loans are extremely popular among entrepreneurs and businesspersons. They borrow such loans to purchase commercial properties like office spaces, commercial floors, or shops. The interest rates are competitive, and they are apt funding options for commercial property purchases.
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Second Mortgage Loan
Some finance companies offer second mortgage loans on properties already under a mortgage. If an individual purchases a property by taking a Home Loan, they can take another loan on the same property to cover their personal needs. These types of mortgages in India are often called top-up loans on Home Loans. Based on the applicant’s repayment history and credit score, lending institutions give additional loan amounts to creditworthy borrowers. The borrower should start paying the second mortgage loan’s EMIs along with the existing Home Loan.
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Housing Loan
This is the most common mortgage type people borrow in India. Consumers apply for small to big-sized loans depending on their needs and the property’s cost they want to purchase. With competitive Home Loan interest rate, loan tenure is flexible, and borrowers of these loans are also eligible for tax benefits.
A housing loan can be an appropriate funding option for the purchase, whether the applicant wants to buy a new or resale property. However, the borrower must use the loan only to purchase a house, not for other business or personal needs.
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Reverse Mortgage
A reverse mortgage is one of the newest types of mortgages in India, as these are special loans dedicated to the financial needs of senior citizens. Many senior citizens do not have an adequate cash flow or steady income in the country. However, many own a property in one form or the other. So, they can mortgage their property with a finance company and get a monthly income against it.
A reverse mortgage works exactly the opposite of a regular mortgage. The financial company keeps the property as a mortgage and pays them a monthly income like EMIs. The company gets the right to sell the property after the owner’s death. They deduct the loan amount from the property’s cost and give the remaining amount to the borrower’s legal heirs.
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English Mortgage
In this type of mortgage, the borrower agrees to repay the loan by a certain date. If they fail to do that, they transfer the property to the finance company after the specified date. The lender retransfers the property to the borrower once they pay the mortgage according to the revised terms and conditions.
- Usufructuary Mortgage
The borrower grants the mortgaged property’s possession to the finance company until they repay the loan in full. During this period, the loan company also receives the right to gain profits from the property, including rent. In return, the loan company adjusts the interest rate or loan amount.
Despite being an easy funding source, borrowers must diligently plan and manage mortgage loans. Non-repayment might result in property loss and negatively impact the credit score. So, borrowers should choose one of the most appropriate types of mortgages in India after assessing their current and future finances, repayment capacity, loan cost and EMIs. They must use adequate tools and calculators to determine loan eligibility and plan the repayment according to their risk tolerance level.
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