Mortgage Loan Society: What is Mortgage Loan on Property?

Mortgage Loan Society: What is Mortgage Loan on Property?

Mortgage Loan Society: What is Mortgage Loan on Property?: A mortgage loan is a financial arrangement in which the borrower pledges real estate to obtain funds from a lender. This mechanism allows individuals and companies to access significant amounts of capital, which are typically used to purchase property, finance business projects, or cover significant personal expenses. The property remains encumbered until the loan is fully repaid, which is guaranteed by the lender.

Mortgage credit companies and mortgage loans

In countries such as the United Kingdom, Australia, and New Zealand, building societies play a key role in providing mortgage loans. These member-owned financial institutions operate as mutual associations and provide banking services, focusing primarily on savings and mortgage loans. Members, both borrowers and depositors, have voting rights and influence the policies of the association. The main objective of mortgage credit societies is to facilitate home ownership among their members through accessible mortgage products.
Home Loans in India

In India, home loans are commonly known as Property Guaranteed Loans (PGA). This financial product allows people to use their residential, commercial or industrial assets to obtain funds. Unlike unsecured personal loans, LAP is secured, which generally results in lower interest rates due to the lower risk to the lenders. The loan amount can be used for various purposes such as business expansion, debt consolidation or major personal expenses, excluding speculative activities.Mortgage Loan Society: What is Mortgage Loan on Property?

Features and Benefits of Home Equity Loan

1. Low Interest Rates: The secured nature of LAP leads to lower interest rates compared to unsecured loans, as the lender’s risk can be reduced by collateral.​Mortgage Loan Society: What is Mortgage Loan on Property?
2. No end-use restrictions: As long as the funds obtained through LAP are not used for speculative investments, they can be used for various purposes such as consolidating high-interest loans, financing weddings or expanding businesses.
3. Extended Tenure: Lenders offer repayment terms of up to 25 years, making monthly payments more affordable and manageable.
4. Larger Loan Amounts: Depending on the market value of the property and the borrower’s credit profile, loans can be up to 85% of the property value.
5. Overdraft Facility: Some lenders offer an overdraft option, which allows borrowers to withdraw funds up to an approved limit, providing greater financial flexibility.
   

Eligibility Criteria and Documentation

To qualify for a home equity loan, applicants must meet certain eligibility criteria, which may vary from lender to lender. Generally, both salaried and self-employed individuals are eligible, as long as they have a stable income and a good credit history. The property used as collateral must have a clear title and be free from litigation.

Required Documents

• Proof of Identity: Official identification such as Aadhaar card, PAN card or passport.
• Proof of address: Utility bills, voter ID or passport.

Proof of income

• Salaried employees: Recent payroll and bank statements for the last six months.
• Self-employed: Bank statements and certified financial statements for the last three years.
• Property documents: Property deed, property tax receipts and approved construction plans. ∀cite∂turn0search3

Interest rates and processing fees

• Interest rates and processing fees for LAP loans vary by financial institution. As of March 2025, some major banks and their respective interest rates are:
• State Bank of India: 9.75% – 11.05% per annum, processing fee of up to 0.5% of the loan amount (maximum ₹25,000).
• HDFC Bank: 9.50% – 13.30% per annum, processing fees of up to 1% of the loan amount (minimum ₹7,500).
• ICICI Bank: 10.85% – 12.50% per annum, processing fee of up to 2% of the loan amount. ∀cite∂turn0search1
• Prospective borrowers should compare offers from several lenders to get the most favorable terms.

Application Process

Applying for a home equity loan involves several steps:

1. Submission of Application: The lender completes the application form and provides the required documentation.
2. Evaluation: The lender assesses the applicant’s creditworthiness and the market value of the property.
3. Approval: After a successful evaluation, the lender approves the loan and defines the terms and conditions.
4. Disbursement: After signing the loan agreement, the approved amount is disbursed into the borrower’s account.

Before applying

Before opting for a home loan or long-term mortgage loan (LAP), consider the following:

Ability to pay: Assess your ability to make monthly payments without affecting your financial situation.

Interest rates: Compare fixed and variable interest rates to determine which one best suits your financial situation.

Loan term: Longer terms reduce monthly payments, but may result in a higher total interest payment.

Processing fees and other charges: Please consider all associated costs, including processing fees, prepayment charges, and legal fees.

Property valuation: Make sure the property valuation is accurate and reflects current market conditions.

By fully understanding the features, benefits, and liabilities associated with mortgage loans and loans against property, borrowers can make informed decisions that are consistent with their financial goals and capabilities.