Loan against property has proven itself to be an efficient means to take care of high-value expenses of home construction projects, business expansion, buying residential plots, etc. It was recorded has the fastest-growing type of retail loan in Calendar Year 2018. The mortgage loan market, which includes loan against property, is predicted to be worth Rs 46.1 lakh crores by 2024.
What is a loan against property?
Loan against property falls under the category of secured loans in which the borrower needs to pledge his property as collateral. The pledged property acts as a security against the loan amount till the loan is repaid. The value of the pledged property decides the maximum approved loan amount. The disbursed loan amount can be utilised by the borrower for business expansion, buying a new property, refurbishing an existing property, home extension etc. as per the requirement of the individual.
LTV for the loan against property
Loan to value ratio, also known as LTV in short, is the term used to refer to the percentage of the net value of the property mortgaged that can be sanctioned from a financial institution. Generally, financial institutions approve a maximum of 65% of the total cost of the property pledged by the borrower but is subject to change depending on the lender.
Eligibility criteria for a loan against property
There are certain criteria that an individual needs to satisfy to apply for a loan against property. Not meeting any of the mentioned criteria might lead to rejection of loan application at a later stage of the verification procedure. To make things easy, applicants can first check their eligibility using a loan against property eligibility criteria before proceeding with the application.
Age of the applicant
The applicant should be at least 21 years and below 65 years old to apply for a loan against property.
Most financial institutions offer loans against property for a maximum tenure of 15 years but are subject to change depending on the will of the lender.
Overall monthly salary
For salaried individuals
Salaried applicants need to have a monthly income of Rs.40,000 and above to be eligible for applying for a loan against property.
For self-employed individuals
Self-employed applicants need to have an annual earning of Rs.3,00,000 and income tax returns of at least 3 years to be eligible for applying for a loan against property.
Salaried individuals need to have a minimum work experience of 3 years to be eligible for applying for a loan against property.
Self-employed individuals must have business stability of a minimum of 5 years to be able to apply for a loan against property.
Fixed Obligation to Income Ratio
Financial institutions generally provide loan against property to individuals with maximum fixed obligations to income ratio (FOIR) of 60%. In case the income of salaried applicants is more than Rs.40,000, a maximum FOIR of 65% is allowed.
Rate of interest on loan against property
Loan against property is offered by multiple financial institutions at variable interest rates. The interest rates generally vary from 8.70 per cent to 15.15 per cent.
Benefits of opting for a loan against property
Loan against property offers multiple beneficial features which can be made use of by borrowers. Some of the features have been mentioned below.
Applying for a loan against property lets you avail up to Rs.3.5 crore at affordable interest rates. This will help you meet all your expenses concerning your project.
Quick disbursal of the loan amount
The simple and minimal requirement of documentation for applying for a loan against property simplifies and revs up the verification procedure leading to disbursal of the loan amount within a few days. This will help you to proceed with your project right away without having to wait.
Supple loan tenure
The borrower has the liberty to set the loan tenure according to his or her financial capability. Applicants can use a loan against a property interest rate calculator to evaluate the exact interest that they need to pay against the loan amount to better estimate their finances in advance.