A mortgage is a loan from a bank or other financial institution that helps a borrower purchase a home. The collateral for the mortgage is the home itself, meaning that if the borrower doesn’t make monthly payments to the lender and defaults on the loan, the lender can sell the home and recoup its money.
Below are the different types of Mortgage Loans in India
1. Loan against Property (LAP)
loan aganist property is commonly known as LAP. LAP is offered for commercial and residential properties. The borrowers have to mortgage their property in order to get funds from lending institutions. The original documents of the property have to be deposited with the lender till the time the loan is repaid in full. The repayment of such loans is done on EMI basis. Borrowers can use the loan amount for any personal or professional needs. Many banks and NBFCs provide an option to calculate loan aganist property EMI on their website. This is for the convenience of the borrowers. These loans usually have a tenure of up to 15 years.
2. Commercial Purchase
Commercial purchase loans are popularly taken by businessmen and entrepreneurs. They take such loans to buy commercial properties like a shop, office space, and commercial complex. This loan is apt for such purchases. The interest rates offered by banks and NBFCs are competitive. Funds from this loan have to be used to buy the property only.
3. Lease Rental Discounting
Leasing our own residential or commercial property is a very common practice. Mortgage loans can be taken against the leased properties too. This is known as ‘lease rental discounting’. The monthly rent amount itself is converted into EMI and the loan amount is given on that basis. The loan tenure and the loan amount, both depend on the tenure as to till when the property will be kept leased. The lease agreement is referred to by banks and NBFCs who are offering the loan.
4. Second Mortgage Loan
Banks and NBFCs offer Second Mortgage Loan for properties which are already under a loan. If a borrower purchases his property by taking a loan today, he can take an additional loan on the same property for personal needs. When a borrower applies for a Second Mortgage Loan, it is commonly called a top-up loan on a home loan. Based on the borrower’s credit score as well as loan repayment history, the lender will give additional required loan. The borrower has to start paying the EMI of the second mortgage loan along with the first mortgage home loan.
5. Reverse Mortgage
A reverse mortgage has been recently introduced in India. It is a special loan, which is introduced for senior citizens. There are many senior citizens who do not have a steady or an adequate monthly flow of income. However, many of them own real estate in some form or the other. So they can opt for this. A reverse mortgage works exactly the opposite of mortgage loans. The way it works is that they have to keep their property as a mortgage with the bank or with the NBFC. The lender then pays them a steady amount of income every month like EMIs. On the death of the senior citizen, the bank or the NBFC has the right to sell the property. The loan amount that is paid to the senior citizens is directly deducted from the amount in which the real estate is sold. The residual amount is given back to the legal heirs of the deceased senior citizens.
6. Home Loan
The most commonly sought after home loan in India is a home loan. Consumers apply for small, medium, and real big-sized home loans. This is because the interest rates are competitive, durations are comfortable, and one gets a tax benefit. One gets the opportunity to refurbish, renovate, and re-build their house. One can take a home loan for purchasing land to build a house or to construct a house on land that is purchased or to even buy an under-construction property. This can be done for new or resale properties. However, the funds that are taken as a loan by the borrower have to necessarily be used for the house only. Such funds cannot be used for any other personal or business needs.
Fullerton India offers loan against property up to INR 12.5 Cr* on residential or commercial properties, with loan amounts up to 70% of the value of the property and attractive interest rates starting from 9%. We offer this product to salaried and self-employed individuals as well as SMEs. Apply today to know more.