Loan Against Property – Technology has made it easy for people to obtain loans against property. You can get home loans from banks and other lending institutions with a simple process. However, the mechanism can be complicated for many people. After all, it isn’t as easy as dialing the Spectrum 1800 number. It is worth mentioning here that loans against property are multi-purpose loans. You can use the loan amount to buy a residential or commercial property or construct a new one. Moreover, you can turn a mortgage loan into a Flexi loan and meet your other expenses. That said, here’s what you need to know before applying for a mortgage:
Here’s What to Know Before Applying For a Mortgage
6 Things To Consider Before Getting A Loan Against Property
All lenders issue loans based on the value of the property. Financial institutions use various factors to calculate the value of the property. These factors include the age of the property, locality, amenities, and legal status. It is advisable to determine the value of your property before applying for a mortgage. Your lender will want to know about the value of the property.
Moreover, the loan amount you intend to take will be decided based on property value. It is easy to obtain loans against newly-built and posh residences. Institutions that provide home loan solutions prefer high-value properties. That’s because the risks associated with such properties are usually low.
The eligibility criteria will depend on your lender’s policy. General rules include age, income status, etc. Make sure to understand the eligibility criteria before applying for a property loan. It will be easy for you to meet your lender’s requirements if you match the criteria. Moreover, they will run the approval process quickly to issue the loan amount to you. Other benefits may include value-added services, a flexible installment plan, and a low-interest rate.
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Interest rate is the ultimate deciding factor when it comes to loans against property. Loan seekers prefer to obtain loans with nominal interest rates. That’s because they’re affordable and do not put an extra toll on pockets. It is worth mentioning here that the interest rate depends on several factors. They include income, loan amount, repayment tenure, and credit history.
Make sure to get an affordable loan under flexible conditions. For that, you’ll have to explore your options. Google banks and lending institutions charge nominal interest rates. Moreover, look out for additional charges. Many lenders offer loans with low-interest rates and costly hidden charges. Even subtle differences can affect your ability to return the loan.
Most lenders cover up to 80% of the value of the property. You will have to provide your lender with the exact estimates. Calculate all expenses and include them in your loan amount. If you want to get a loan for construction, calculate the cost of material and labor as well. When you’re done with your calculations, review other factors like your monthly income and other expenses.
It is advisable to visit the lender market and find the best deal. You can look around for subsidized mortgage solutions. State departments offer such types of loans. Keep the list with you during your visit to lenders. Moreover, you can calculate your mortgage using an online home loan calculator.
Many banks and financial institutions offer a repayment tenure of up to 20 years. You’ll have to compare the pros and cons of short-term vs long-term repayment tenure. Longer repayment durations might be affordable but they come with an increased cost of borrowing. Short-term loans, on the other hand, offer nominal interest rates. Remember, the loan amount carries compound interest. The longer the repayment period, the greater the cost of borrowing.
No Tax Benefits
Many people forget that they have to pay tax on mortgages. Loans against property differ from other types of loans. You will have to pay a certain amount in tax on the mortgage. Moreover, evaluate all requirements before applying for a home loan. Run multiple checks to verify the authenticity of your lender.