A loan against property (LAP) helps utilize the locked-in value of the property for personal or business use. The facility is available for up to 10 years. The foremost requirement for LAP is that the property under mortgage needs to be in the borrower’s name.
LAP is an ideal financing option for high borrowing. The lending institution will assess the market value of your property and can offer up to 70% of its value as a loan amount. Your mortgage property will remain as collateral with the lending institution for the loan tenure. Still, you can continue to use it as before.
How to Get the Best Mortgage Loan?
Lending institutions can provide a lump sum, up to INR 5 crore, against your pledged property at an affordable interest rate after determining your eligibility based on crucial parameters, like property type, applicant’s income, etc. Here are five essential tips to obtain the best mortgage loan. Scroll down to know about that:
- Understand your loan options with interest rates
Learn about the loan options before applying to choose a suitable loan option. Mortgage loans are usually offered at fixed interest rates or fluctuating interest rates. Generally, a fixed interest rate is preferable to most borrowers. You need to provide identification documents for the LAP loan.
- Set Budget
Borrowers should gauge their financial requirements and situation to decide on the right loan amount. An individual should apply for a loan amount against mortgage property that they can conveniently repay without adversely impacting their finances during repayment tenure. Ideally, apply for an amount that keeps your loan-to-income ratio low.
Applying for a loan with a high EMI may affect your other financial obligations, like your retirement or child’s education funds. You may surrender a high portion of your income to the loan. Therefore, it is crucial to consider your other financial goals or obligations before deciding on a loan amount. You can use a loan EMI calculator to know the EMI amount before finalizing the loan amount. If you are comfortable with the EMI amount and can repay the loan within the loan tenure.
- Maintain a high credit score
A credit score is an important eligibility criterion for every lending institution. It impacts the loan interest rates greatly. A lender requires a credit score of 750+ to offer you a loan at competitive interest rates. If it is low, you will be a high-risk borrower for lenders, and it may offer a loan at a higher interest rate comparatively. The lender can even decline a loan application with a low-interest rate.
- Apply for a shorter-term loan
Often borrowers consider a longer repayment loan tenure that can reduce their monthly obligation on EMIs. Of course, a long-term loan can reduce the EMI. But, an individual should consider applying for suitable shorter repayment loan tenure as it will reduce the interest cost. Generally, LAPs are offered with a tenure of between 1-15 years. You can choose a convenient short-term repayment tenure using a loan calculator. It will reduce the overall interest amount significantly.
- Preparation for Documents
You should make an application with all the necessary documents for the LAP loan. These loans are available against minimum documentation. Required documents for LAP loan typically include the following:
For Salaried and self-employed individuals:
- Income Tax Return (ITR) for the last three years
- Bank statements for the last six months
- KYC documents
- Form 16
- Property documents
- For SME
For Businesses:
- KYC documents
- Income statements
- Bank statements for the last six months
- Income Tax Returns for the past three years
- Property Documents in the name of the applicant
Also, borrowers can consider availing insurance for a larger amount of property loan. Generally, property loans are offered with an option of long-term tenure. Industry experts recommend borrowers buy a term plan. With insurance, you are providing a safety cushion to your family members that ensures that they do not meet financial issues in the future due to any mishap.
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Thus, you can easily apply for the best loan against property (LAP). The application process for a property loan with renowned NBFCs is simple, with minimal documentation. You can get a loan at competitive pricing from leading NBFCs like Fullerton India.
