A mortgage advance is a type of secured loan that individuals can avail by collateralising an immovable asset, such as a residential or commercial property. Being a secured loan, borrowers can draw a high-value amount by availing this loan. Further, one of the best features of this loan is that it comes with no end-use restriction.
However, due to its big ticket-size, individuals avail this loan mostly for high-value purchases, for example, to buy a home. Besides, this loan can also be availed for varied purposes, for instance, financing higher education, meeting wedding expenses, emergency medical expenses, carrying out business expansion and several others. Below are given further details regarding this financing option.
Mortgage loan are popular credit options in India that help fulfil one’s high-value funding requirements. Most financial institutions extend this secured credit option at attractive rates of interest for borrower convenience. Individuals can further look for the best mortgage loan interest rates to repay affordably. Tips to get best mortgage loan rates:
- Making a high down payment
- Income Stability
- Choosing interest type carefully
- Comparing lenders for the best rate
What are the types of mortgage loan?
A mortgage loan is also popularly known as a loan against property in India. Furthermore, this loan is also classified into two major types based on the method of a loan agreement. A few are mentioned below.
- Oral mortgage or equated mortgage
In an oral mortgage, a borrower needs to transfer the title deed of the property as a security to the lender. He/she also orally confirms the same. A lender assesses the proposed property to be mortgaged and then sanctions a loan. However, in this option, no legal procedure is implemented on the equated mortgage. Due to this, the stamp duty and other charges are generally low to negligible compared to a registered mortgage. However, most lending institutions ask borrowers to submit property documents as security.
- Registered mortgage
Another popular mortgage type prevalent in India is a registered mortgage. In this case, a lender necessitates creating a charge on the property through a legal procedure that is written and formal. This type of mortgage is also called a ‘deed of trust’.
Since several legal formalities are involved in this loaning option, the property title is returned to the borrower only when he/she repays the loan following the terms and conditions of the lender. In that case, the authority and rights of that lender would be counted as null on the property. On the other hand, if a borrower fails to repay a loan within the stipulated tenor, the lender has the right to auction the property.
Some other mortgage types include –
- Usufructuary mortgage
- Mortgage by conditional sale
- English mortgage
What are the features of mortgage loans?
Just like any other secured loans, mortgage loans also come with diverse features. Following are some of them.
- High loan amount
For mortgage loans, generally, the borrowers can draw up to 70% of the property’s value as the loan amount. However, in some cases, it can stretch up to 85-90% based on borrower eligibility. Further, select lenders provide a loan of up to Rs.3.5 crore as a mortgaged advance.
This particular loan also comes with a flexible and long tenor of up to 20 years.
- Interest rates
Mortgage loan interest rates generally depend on market trends and can either be fixed or floating. However, borrowers with good credit history can negotiate for lower interest rates from the chosen lender.
Further, a borrower needs to repay the loan through equated monthly instalments. It comprises both the principal and the interest component. One can use a mortgage loan EMI calculator available online to estimate the EMIs and decide accordingly.
These are some fundamental components of mortgage loan that borrowers need to know, especially if they are availing it for the first time.
How can you repay the loan?
The loan repayment is the one the most crucial aspects of servicing the advance. Hence, if you don’t want to fall in the debt trap, you should always gain a clear idea about how to prepay your loan against property in 5 easy steps.
While EMI payment is the ideal mode of loan repayment, they can also prepay the loan at any time before the tenor’s end as and when there is a surplus. Prepaying the loan allows borrowers to get rid of debts quickly, and also aids in improving their credit score. Moreover, lenders also offer balance transfer to allow easy repayment with reduced liability via low rates of interest.
Top lending institutions in India further offer mortgage loan with competitive interest rates and affordable repayment structure. They also extend pre-approved offers on different financial products such as loans against property, home loans, etc. It makes the loan approval process effortless and saves a lot of time as well. You can check your pre-approved offer by entering your name and contact details.
Moreover, before applying for this loan, you should also know about how mortgage loan influence your CIBIL score. Since this score plays a vital role in determining your loan eligibility, paying heed to this aspect will enable you to borrow conveniently in the future.