What is a Mortgage loan?
A mortgage loan is a type of loan that is popular for its high financing capacity and long repayment term tenure. This form of loan is possible when the borrower pledges their property as collateral to the lender. The borrower may even pledge their commercial or residential property as collateral to secure a loan.
Mortgages are lucrative as the owner gets to enjoy the continuous benefits of the property and may gain possession once the amount borrowed has been repaid.
Along with this, the restrictions of a home loan or a personal loan do not apply to a mortgage loan such as “Loan against property,” wherein the borrower may use the amount as they please – be it a vacation, renovation, wedding, or even education expense.
How to apply for a Mortgage Loan?
It is fairly simple to apply for a mortgage loan these days, and few criteria dictate the eligibility of a candidate. Every banker or lender has its own set of eligibility listings, but they more or less remain the same, such as:
- Indian citizenship
- Regular source of income (salaried or self-employed)
- Owning a residential or commercial property
- Minimum age of 18 years old and maximum age of 75 years old
Meeting these criteria is sufficient to start processing your application for a mortgage loan.
Which Documents are required?
Unlike other applications, you are required to provide an assortment of documentation to acquire a mortgage loan. Apart from basic identification, here is a list of documents that you are required to furnish at that time of processing your mortgage loan:
- Identity proof such as Pan card, Aadhaar card, Voter ID, Passport
- Address proof such as Aadhaar Card, Voter ID, Utility receipts such as property tax, and electricity bills (under 3 months old)
- Income Tax Returns for the past 3 years
- Bank account statement for the past 6 months to 1 year
- In the case of the self-employed individual, balance sheet that has been audited by a CA for the past 1 year.
- Certificate of business such as Pan Card, GST certificate, etc.
- Property documents such as sale deed, lease deed, etc.
- Latest property tax receipts.
All of these documents are to be submitted without any dispute in terms of authenticity. In case there are any discrepancies, then it might cause an issue while processing your mortgage loan. Hence, it is best to ensure that you provide all necessary documents in one go while submitting your application to avoid any hassle.
What is the Best Interest Rate You Can Avail?
Since Mortgage Loans are secured loans their interest rates and other charges are lower in comparison to unsecured loans like personal loans or home loans. Although many factors decide the interest rate that you will receive such as credit rating (SIBIL Score), property valuation, loan tenor, and candidate’s profile.
- Credit Rating or SIBIL Score
Your credit rating determines the interest rate that you will receive for your Mortgage Loan. If you have a very high credit score, then the interest rate that you will be approved for will be much lower in comparison to a credit score that is lower than required. The recommended credit score should be 650 or higher.
- Property Valuation
Your property type plays a major role in determining your rate of mortgage loan interest rate. If your commercial or residential property is well maintained and in a good locality then you might be able to fetch a substantially lower rate of interest in comparison to a property that is unkept or in a relatively common locality. The age of the property also dictates the rate of interest as a new property will fetch lower interest as compared to an old property.
- Loan Tenor
Your loan tenor decides the rate of interest that will be applicable for you. Even though Mortgage Loans are longer induration wherein your EMI’s are payable from 10-15 years.
In case the loan that you avail is of a shorter duration then your EMI’s and rate of interest may be on the higher side.
- Candidates Profile
Among other factors, the candidate’s profile such as age, occupation, monthly income, etc is important factors. If a person is nearing his retirement age the rate of interest will be much higher compared to someone is who is just starting their career will get a much more competitive rate of interest.