Why you should buy a property that already has a Mortgage Loan

A mortgaged property is one that has already been used as collateral by the owner, for a mortgage loan that is still unpaid. Buying a mortgage property is often a good deal for both the buyer and the seller. The buyer gets a great deal on a property that has already been verified and evaluated, by a bank or NBFC, when the seller applied for his mortgage loan. And the seller gets a chance to clearing his loan against property or mortgage loan with the money he receives from the sale.

Finding a mortgage property is not a problem, since mortgage loan interest rates are so low, people often opt for this type of loan. But buying a mortgage property or a property against which a loan against property has been taken, can be a difficult task, especially when the buyer needs to get a loan to purchase it. The buyer obviously cannot opt for loan against property for this property, he also cannot get a loan with bank until the seller’s mortgage loan is cleared.

This isn’t as confusing as it seems though, here’s a step by step guide to help you purchase mortgage property of your own.

1.   Get all documents from the seller up front: Ask for all the deeds and stamp duty papers or copies of them, from the seller, to ensure the property is indeed in their name. If the property has be sold and resold a number of times before, you can ask for all the deeds as well. The bank will release the deeds of the current property only when the loan against property is repaid, meanwhile you can make do with photocopies of the same.

2.     Close the ongoing loan: This is where the deal gets a little a tricky. The easiest way to do this is to use your own funds to pay the seller so he can close his ongoing mortgage loan. This possible only if the outstanding loan about is small.

The second way to do this is to opt for a loan with the same bank where the seller has an ongoing loan against property. You ask the bank to close the sellers’ loan against your loan, so in a way you’re taking over his mortgage loan. In both these cases transfer of the property is simple.

The third way to do this is to opt for a home loan with a different bank. You can then close the loan with the seller’s bank by using this money. This process is a little confusing and complicated. You need to get a NOC from the seller’s bank as this loan too will be for the same property.

If you go about it in a systematic way buying a mortgage property can be profitable to both parties.

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5 essential things you need to know before taking a Loan Against Property

Loan against property is an age-old way for lending and borrowing money. It has been done for centuries. Our ancestors mortgaged their homes and land to borrow money for farming, weddings and to educate their children. With time the system of taking loan against property too has become more sophisticated. You can now approach a bank and get a loan sanctioned by keeping your property as collateral.

A mortgage loan can get you a longer tenure and a higher sum. The amount you can get through mortgage loans depends on the size and valuation of the property you mortgage. The bigger the property, the higher amount of loan you can get.

You could use this loan amount at your own discretion. You can use to fund the education of your children, you can use it to fund their weddings, and you can use it to invest in other property, to invest in your business. You can even use to fund a medical procedure too.

Loan against property is the best way to get a loan. The loan against property eligibility is also minimal. You only need to have a good credit score and a property to mortgage. If you need to take a loan and are considering this kind of loan, then here are a few things you should know.

1.  Loan Against Property can get you a higher loan amount for your business or personal needs with the benefit of lower EMI. With easy documentation, speedy approvals and flexible repayment options, getting a loan is easier than any other time of loan.

2.  Loans can be applied for by individuals, either solely or jointly. Owners of the current property, in respect of which the loan is being sought, will have to be co-applicants. However, the co-applicants need not be co-owners. 

3.  To check your loan against property eligibility the lender will check the market value of your property. Banks and NBFCs give only a percentage of the market value as loan.

4.  Since a mortgage loan is a secured loan it is cheaper than personal loan. Mortgage Loan Interest Rates are way lesser than those of personal loans. Today interest rates for personal loans can range from 12.5% to 21% whereas those for mortgage loans are between 12% to 15%.

5.  The processing charge for this type of loan is 0.50% to 3% of the loan amount plus service tax. Service tax is currently 14% of the amount. The processing fee is usually deducted from the loan amount sanctioned to you.