All you need to know about Mortgage Loan

Posted in: Bank Loan | on: November 27, 2020

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What is Mortgage Loan?

Mortgage loan is a kind of secured loan which you can avail from the bank by pawning your property. When compared to other loans, the interest rate for mortgage loan is slightly lower and may range from 8.15% to 11.80% per annum. In mortgage loan, you can get loan up to 60% of your property's registered value. However, some banks offer mortgage loans up to Rs. 10 crore. The repayment period for mortgage loan may be 15 years.

Why you need to take Mortgage Loan?

You can take mortgage loan under the following reasons.

  • Paying for children's higher education
  • Paying for children's marriage
  • Medical emergency
  • Home renovation
  • Business expansion

What are the benefits of Mortgage Loan?

Some of the benefits of mortgage loan are,

  • It offers higher loan amount.
  • It attracts lower interest rate than other loans.
  • It is a cheap and secured way of borrowing which you can repay through smaller monthly EMIs.
  • With mortgage loan, you can buy your own house and be the owner once the repayment is done.
  • It involves convenient and easy documentation process.
  • You can apply for this loan both in online and offline.
  • This loan accepts under construction, fully constructed, residential and commercial properties as collateral.
  • This loan can be used both for business and personal needs.
  • You can select from various interest rates for your loan repayment such as fixed interest rates, floating rates, payment option ARMs and interest-only mortgage.
  • You can avail this loan anywhere in India with the network of bank branches.

What are the types of Mortgage Loan?

Mortgage loan are of three types. They are,

  • Home loans
  • Commercial property loans
  • Loan against properties

You can get home loan or commercial property loan only to buy home or commercial space. But loan against property don't have any such restrictions. It can be used for home renovation, education, marriage, etc.

What are the eligibility criteria to apply for Mortgage Loan?

You need to fulfill the following eligibility criteria laid down by the banks and financial institutions for loan approval. Though the criteria may vary for each bank, the following factors determine your eligibility.

  • Minimum age requirement 21 years
  • Gross annual/monthly income
  • Property value
  • Income proof documentation
  • Number of dependents
  • Existing liabilities.

Both salaried and self-employed individuals are eligible for mortgage loan.

What are the documents required to apply for Mortgage Loan?

The documents required to apply for mortgage loan may vary according to the employment status - salaried or self-employed.

If you are salaried, you need to submit the following documents.

  • Duly filled and signed loan application form
  • Recent passport-size photographs
  • ID proof - Aadhaar card, PAN card, driving licence, passport, voter ID, etc.
  • Address proof - Aadhaar card, ration card, driving licence, rental agreement, electricity bill
  • Form 16 issued by the employer
  • Latest salary slips
  • Processing fee cheque
  • Latest bank account statement

If you are self-employed, you need to submit the following documents.

  • Duly filled and signed loan application form
  • Recent passport-size photographs
  • ID proof - Aadhaar card, PAN card, driving licence, passport, voter ID, etc.
  • Business proof
  • Last 3 years ITR certificates
  • Processing fee cheque
  • Latest bank account statement
  • Profit and Loss statement

What are the things to be considered before taking Mortgage Loan?

If you are going to take mortgage loan, here are the few things you need to consider.

Loan Amount:

In order to avail mortgage loan, you need to pledge your residential or commercial property as collateral. Depending on the registered value of your property, the loan amount will be sanctioned. Most of the banks and financial companies have a margin ranging from 40% to 60%. Property's condition and age also determines the loan amount.

Rate of Interest:

Depending upon the bank, you can select interest rate from 11% to 15%. You can select either fixed interest rate or floating rate.

Tenure:

Banks offer repayment period up to 15 years. But if you have opted for overdraft facility, the repayment tenure may be lower.

Fees and Charges:

Mortgage loan comes with variety of charges which includes processing fees, application fees, documentation charges, loan overdue fees, property inspection fees, loan conversion fees and late payment penalties. These charges may increase your loan amount.

Repayment Mode:

The loan repayment mode may vary for each bank. Though most of the banks offer EMI option, other repayment options are also available. Before getting loan, clarify this with the bank.

Eligibility Factors:

Before applying for the loan, check the criteria with your bank. Depending on your employment type, residency status, age, income and other factors, the loan criteria may change.

How to apply for Mortgage Loan?

You can apply for mortgage loan either in online or offline. If you want to apply in online, visit the bank's official website and select the product which you want to apply for. If the bank offers online application you will find 'Apply Now' option on the webpage. Complete the online application process and submit all the details.

To apply in offline, visit the nearest branch with necessary documents, get application form and submit it.

Here is the step-by-step process involved in availing mortgage loan.

  • Document collection for processing loan
  • Credit appraisal by the bank
  • Authentication of personal/business information provided
  • Sanction letter delivered through post or email after approval
  • Request for disbursal
  • Collection of property documents
  • Evaluation of property and its documents
  • After successful verification, delivery of disbursement cheque.

What are the types of interest rates on Mortgage Loan?

To repay your mortgage loan, you need to choose either floating interest rate or fixed interest rate.

Floating interest rate:

The interest rate may change according to the current market rates. You cannot guess the current interest rate but can check for it in the bank's website. The floating interest rate may change constantly and it is directly linked to Marginal Cost of funds based Lending Rate (MCLR).

Fixed interest rate:

In fixed interest rate, the interest rate remains fixed for the entire loan repayment period. If you have chosen short tenure mortgage loan, you can opt for fixed interest rate. In case you are looking for long tenure mortgage loan, you may not get fixed interest rate.

Compare Mortgage Loan Interest Rates offered by various banks:

Name of the Bank Interest rate p.a Loan Amount Loan Tenure Processing Fee Fore-closure charges Penalty
SBI 1.60% above 1 year MCLR rate - 2.50% above 1 year MCLR rate Up to Rs. 7.5 crore Up to 15 years 1% of the loan amount or a maximum of Rs. 50,000 + service tax No pre-payment charges 2% p.a
ICICI Bank 9.40% onwards Up to Rs. 5 crore Up to 15 years 1% + Tax 4% + applicable charges for floating and fixed interest loans 2% per month
HDFC Bank 8.75% onwards Up to 60% of the property's market value Up to 15 years Up to 1.50% or Rs. 4500 whichever is higher + Tax 2% + Tax + other charges if the loan is repaid within the first 6 months from the disbursement date 2% per month
PNB 9.80% onwards Up to 60% of the property's market value. Up to 15 years Rs. 1500 No pre-payment charges 2% per month
Axis Bank 10.50% onwards Up to Rs. 5 crore Up to 20 years 1% or Rs. 10,000 whichever is higher For asset power and lease rental discounting, 3% for non-individuals if the prepaid amount is above 25% of the principal outstanding amount during a quarter and nil for individuals. 2% per month
Citibank 8.15% onwards Up to Rs.5 crore Up to 15 years Up to Rs. 5000 Depending on the loan type and borrower type, charges may vary. 2% per month
IDFC Bank Up to 11.80% Up to Rs. 5 crore Up to 15 years Up to 1% of the loan amount No pre-payment charges for floating and fixed rate loans for individual borrowers. 2% per month
Karur Vysya Bank 10.00% onwards Up to Rs. 3 crore Up to 100 months 0.5% of the loan amount 2% on the prepaid amount -
Union Bank of India 9.80% onwards Up to Rs. 10 crore Up to 12 months 0.5% of the loan amount + Tax No pre-payment charges 2% per month
Federal Bank 10.10% onwards Up to Rs. 5 crore Up to 15 years 1% of the sanctioned amount with a minimum of Rs. 3000 No fore-closure charges on term loans and floating rate for individuals 2% per month
Vijaya Bank Contact the bank Up to Rs. 5 crore Up to 10 years Up to 0.55% of the loan amount - -
HSBC Bank 8.80% onwards Up to Rs. 10 crore Up to 15 years 1% or Rs. 10,000 whichever is higher No pre-payment charges for floating rate loans 2% per month
Corporation Bank 10.85% onwards Up to Rs. 5 crore Up to 10 years 1% of the loan amount for term loans No pre-payment charges -
Oriental Bank of Commerce 10.95% onwards Up to Rs. 10 crore Up to 10 years

0.50% of the loan amount + service tax for term loans

0.10% of the loan amount + service tax for overdraft facility

- 2% per month

 


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