Different Types of Mortgage Loans in India

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The loan against property market in India is predicted to double between 2019 and 2024, as per a recent prediction. This sudden boom is due to the increased credit awareness amongst individuals. Today, more borrowers are ready to collateralise their owned property to acquire emergency funding.

However, before you send your mortgage credit application, you should understand the various intricacies of such loans. Start by assessing the different types of secured loans available against property collateral in India.

Types of mortgage loans

Indians can choose from six distinct types of mortgage financing based on their unique needs and situations. Loan against property is one of the most popular forms of mortgaged advances availed by borrowers to fulfil their big-ticket funding needs with ease. Still, keep in mind that a lender may not provide all of the mortgaging options. The top few mortgage types include the following.

  1. English-mortgaged loan

At the outset of such a loan, your property is transferred to your lending institution. The only way to recover this property from your financier’s collateral charge is to repay any dues within a predetermined tenure. Failure to do so enables the lending institution to sell this property and recover its losses.

  1. Simple-mortgaged loan

It is the most common form of loan provided against property collateral available to individuals. Here, one simply collateralized the property to acquire a loan against this immovable asset. 

Borrowers are free to use the mortgaged property as they wish during the loan repayment tenure, provided they service EMIs regularly.

  1. Conditional sale-mortgage loan

Conditional sale collateral is another popular type of loan against property you should know about. In this loan type, the borrower sells the property in question to the lending institution during a loan application. However, he/she can reacquire this property on the condition of successful and timely repayment of the advance.

Thus, for the duration of repayment, your property essentially belongs to the lender. They can even receive rent from the property during this time. 

  1. Usufructuary-mortgage loan

Another form of mortgage loan, in this kind of credit, the lender essentially acquires the collateralised property. However, the borrower does not face any liabilities under such financing options.

Instead, the lending institution is responsible for recovering the principal and interest earning from the property’s rent and other avenues of profits from it.

  1. Mortgaging property deed

In this form of mortgage financing, borrowers need to submit their property deeds to the financier at the time of loan application. Loan proceeds are offered against the value of this deed. Lending institutions retain full ownership of this deed until the owner repays his/her dues completely.

  1. Anomalous mortgaging

In case any other kind of mortgage agreement is formulated, it can be classified under this anomalous type. In practice, only a few lenders may provide all of the options listed above when you choose to apply for a loan against property.

Besides these types of mortgaging, individuals should also assess the eligibility criteria to meet when acquiring this form of credit. Otherwise, they may face rejection or unnecessary delay in loan application approval.

Eligibility criteria for loan against property

One should understand that the eligibility for this advance can differ based on your lender. Still, listed below are some of the common criteria for all financial institutions – 

  • Age – A borrower’s age determines whether he/she is eligible to acquire credit. In general, individuals aged over 50 years may need to service higher interest rates than younger borrowers do.
  • Employment – Salaried applicants need to meet work experience requirements, as specified by the lending institution. For self-employed individuals, business venture must match the minimum requirements, as well.
  • Income – Your income will determine whether you are eligible for a loan against land. Although some lenders offer a quantum of up to Rs.3.5 crore to borrowers, you must carry the necessary monthly income to service EMIs for these considerable loans. 
  • Property age and condition – The age and overall condition of a property is also an essential eligibility factor to consider. Dilapidated or old homes may not fetch a significant principal. The location of the property can also affect one’s eligibility when it comes to mortgage credit.

Individuals who meet or exceed all of these requirements can avail pre-approved offers to simplify and hasten the loan application process. Reputed lenders bring these offers on several financial products, like home loans, loans against property, and more. You can check your pre-approved offer by submitting just some essential information.

A borrower can benefit significantly by keeping these factors in mind. Understanding the various types of mortgaged credit should only help choose the most suitable form of collateralisation to avail suitable credit.

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