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.

Loan against property can serve your immediate fund requirement

Loan against property makes immediate funds accessible to you.

●       It is available for salaried and self-employed employees.

●       You enjoy the benefits of adequate loan amount and long repayment tenure.

●       It is economical than a commercial loan and the funds can be utilized for multiple purposes.

●       You can use a simple mortgage calculator.

●       The processing is easy and requires simple documentation.

●       It can be availed anywhere in India, loan against property Delhi, Mumbai, Bangalore or any other city is a secured loan that is availed by mortgaging a self-owned property with the lender.

●       The property can be residential or commercial.

●       Basically, loan against property gives you access to immediate funds by utilizing your property as collateral. Long repayment term along with low Mortgage Loan Interest Rates makes it a great choice.

Let's understand more about this loan that has emerged as a widely opted funding option for many owing to the host of advantages it has to offer.

HIGH LOAN AMOUNT WITH EXTENDED REPAYMENT TENURE

●       You can use the Loan Against Property EMI Calculator to calculate the details.

●       Varying as per the lender’s policies, you can take a loan up to 60 percent of the market value of the underlying property.

●       Also, you can take advantage of the comparatively long repayment tenure (up to 15 years)

●       This gives flexibility and ensures that the EMI is within your reach.

LOAN CAN BE UTILISED FOR MULTIPLE PURPOSES

●       The lender does not restrict the utility of the amount lent.

●       It can be utilized for various purposes ranging from a wedding expense to financing business plans or meeting any healthcare expenses.

●       You can even buy a property or any asset using this facility, which might not otherwise qualify for a loan in its own capacity.

LOAN FOR ALL

●       This facility is versatile and is not only for the salaried but also for self-employed individuals or businessmen.

SIMPLE DOCUMENTATION AND EASY PROCESSING

●       In comparison to other mortgage loans, Loan Against Property has an advantage of minimal documentation and quick disbursal.

ELIGIBILITY

●       In unsecured loans your present income will determine the loan amount.

●       However, in case of loan against property eligibility for the loan amount is determined by the present property value along with the income.

●       In addition to this, age and past credit history of the applicant can also impact the loan amount and repayment terms.

DOCUMENTATION

●       Along with the proofs of identity and application form, address, income proof, ownership documents and a property valuation report also has to be submitted.

COSTS AND REPAYMENT

●       The maximum repayment tenure is 15 years.

Depending upon the lender there may be a processing fee, mortgage loan stamp duty and other charges applicable over and above the interest applicable on the loan.

Five Essential Things to do When you Take Loan Against Property

It’s an age old, time test practice to take out a loan against property. Property is said to be the best investment and people have often use their own homes as guarantees or as a mortgage.  Loan against property is preferred by many because this way you can get a higher loan amount with the benefit of lower EMI. Loan against property interest rates are lower than those of personal interest rates. You can also get a longer tenure on your loan against property, than you can get on a personal loan.

Recently, Crisil said in a note that the amount of loans taken against property is set to double to Rs.5 trillion by 2019 and it is expected that the number will grow by 22% annually in the next four years. There are also emerging signs of a build-up in risk as competition intensifies, Crisil noted.

Loan against property has a lot of benefits and for that many people choose to opt for it, so if you’re considering opting for a mortgage loan here are some things you must keep in mind.

1.   Always opt for a short tenure: Loan against property gets you a long tenure of almost 15 years or more to pay back. This one of the benefits of this type of mortgage loan but it also means that you pay more EMIs thereby paying back much more than you owe.  So always opt for short tenure for your loan against property.

2.   Always insure large loans: When you take out a large loan like a loan against property, it’s always advisable to buy insurance so that in case of any unfortunate circumstances at least your family is don’t have to face the burden of loan repayment. Banks offer term insurance along with large loans so that they at least cover the loan amount in case something was to happen to you.

3.   Read and understand: All loans come with a lot of terms and conditions. Read all the documents attached to your loan agreement carefully and sign them only on understanding them thoroughly.

4.  Replace large loans: If you have too many high cost loans you can replace them with loan against property. Loan against property can be used to consolidate all your outstanding loans. It is a good idea to close your costly loans at the earliest.

5.   Make all payments on time: Being late with your EMIs can affect your credit score adversely. Make sure you pay all your EMIs in time to maintain a sound credit score.

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