Know the Basics of a Mortgage Loan

A mortgage loan is a secure financing option that individuals can opt for to meet their financial requirements. They come in the form of a home loan or as a loan against property with the borrower mortgaging his/her property to avail the funds. 

A borrower can avail a high loan amount, and, unlike personal loans, the mortgage loan interest rates are affordable. Additionally, it comes with a long repayment period. These factors make it easier to repay the whole amount without any financial strain. Additionally, a loan against property has no end-use restrictions and the procured funds can be used to meet diverse financial needs such as – 

• Wedding expenses

• Higher education fees in India and abroad

• For consolidation of debt

• To purchase, renovate or construct a house.

However, loan against property is not to be confused with a home loan. A home loan is availed to purchase a house whereas a loan against property is availed against an existing property owned by the borrower.

However, apart from knowing what a mortgage loan is, there are several things that you should keep in mind. They are – 

• Application process – 

You can easily complete the mortgage loan application online by following a few simple steps. These steps have been listed below – 

Step 1: Log in to your lending institution’s website.

Step 2: Go to the mortgage loan section and fill up the application form.

Step 3: Submit the application form, along with relevant documents.

Step 4: Wait for loan disbursal.

However, before applying for a home loan or a loan against property, make sure to go through the eligibility criteria set by the lending institution and see whether you meet the requirements or not. Your loan application may face rejection if you do not satisfy specific eligibility requirements.

Some lending institutions also provide pre-approved offers to applicants, enabling them to avail credit quickly and without any hassle. One can avail these offers on secured loans like home loans, property loan, mortgage loans and the like. You can check your pre-approved offers by entering only your name and contact details.

• Documents required – 

Borrowers should keep the necessary mortgage loan documents, listed below, at hand during the application process – 

1. KYC documents, which include any of the officially valid documents such as passport, Aadhar card, PAN card, voter ID, driving license etc.

2. Proof of income like salary slip, income tax returns, bank account statements.

3. All property-related documents.

• Mortgage loan interest rates – 

There are two types of lap loan interest rates – fixed and floating interest rates. Borrowers can opt for any one of them as per their convenience. Additionally, the interest rate also depends upon several factors such as – 

1. Down payment – If you make a substantial down payment, it will reduce the overall cost of a loan thereby decreasing interest payments.

2. Credit score – An impressive credit score will result in faster approval loans. It also offers you an opportunity to negotiate with your financial institution for better interest rates. Besides interest rates, you should also note that credit scores affect loan against property eligibility.

3. Employment status – if you are employed at a reputed MNC or public sector or have a stable source of income, lenders may provide you mortgage loans with favourable interest rates.

• Mortgage loan EMI calculator 

An applicant can use a mortgage loan EMI calculator to determine the amount they will be paying every month. It will enable them to adjust their monthly finances beforehand. Go through the steps below to know how to use a loan EMI calculator – 

1. Log in to your financial institution’s website.

2. Go to the loan section and click on the loan EMI calculator.

3. Enter the loan amount, tenor and rate of interest. 

4. After you have entered the amount, the calculator will display the EMI, the total loan amount and total interest payable.

Apart from knowing what a mortgage loan is, applicants should also go through the associated fees, including the part-prepayment and foreclosure fees charged by a lender on such credit. Fees and charges for a loan against property can significantly increase your overall burden. Thus, reading the loan terms carefully is critical to ensure that you are not paying for any hidden charges.