What is a Mortgage Loan in India?
A Mortgage loan refers to a loan when the borrower, in order to secure such a particular loan, offers some kind of an immovable asset, be it a residential or commercial property as collateral. These kinds of loans not only have the benefit of having long-term repayment options but also have interest rates lower than unsecured loans. Mortgage loans are extremely beneficial when you have any heavy expenditures that need to be incurred immediately, be they for recreational or even business purposes.
Types of Interest Rates on Mortgage Loans:
There are two types of interest rates offered on a mortgage loan:
- Fixed Interest Rates: As suggested in the name itself, the interest rate remains the same for the entirety of the loan tenor. Fixed interest rates opt during shorter tenors. In the case of longer tenors, it might not be possible for the candidate to apply for a fixed rate.
- Floating Interest Rates: This type of interest rate keeps on changing concerning the current market rates. The rate changes recurrently and is linked to the Marginal Cost of Funds based Lending Rate.
Factors That Determine the Interest Rates
Several factors come into play when it is time to decide the appropriate interest rate on the property loan. Even though the mortgage loan interest rates are comparatively lower than the unsecured loans, lenders must determine them through several elements to know the lowest. We discuss the most important of these elements below:
Credit Score or SIBIL Score-
The candidate must have a high credit score to be approved for a lower interest rate in comparison to the rate they might get with a low credit score. It is recommended to have a credit score of 750 or even higher.
A mortgage loan is generally of 15- 30 years. A loan with a shorter tenor will have a lower interest rate but will attract higher EMIs. Similarly, with a higher tenor loan, the interest rate will be high with a considerably lesser amount of EMIs.
Location and Valuation of the Property-
If the property of the candidate is well kept and situated in a nice area, the interest rate becomes substantially lower as compared to a property situated in a rather ordinary locality and lacking proper maintenance.
Mortgage Loan Eligibility
There are a set of criteria that every lender follows more or less to test whether the candidate qualifies for a property loan. The following are some of these criteria:
- The candidate must be a resident of India.
- They must own a property of their own — whether residential or commercial — in India.
- They should have a stable and consistent source of income (can be a salaried individual or self-employed)
- The minimum age requirement is 18 years and ranges up to 75 years of age.
The candidate must satisfy all the above criteria in order to be shown as eligible for securing a mortgage loan.
What All Documents Are Required to Apply for a Mortgage Loan?
A candidate is required to submit a variety of documents while applying for a property loan. It is advised to provide all documentation in a precise way and in one go as any kind of inaccuracy or mistakes in the documents can not only delay the process but also create unnecessary hassles. The documents require’s during the processing of the loan are:
- Any sort of identity proof document like an Aadhaar card, pan card, passport, etc.
- Document stating your residential address, such as Aadhaar card, Voter Id, electricity bills, or any sort of utility bills not surpassing a period of 3 months
- Income Tax returns for the past 3 years
- Bank Account statements ranging from the period of 6 months to 1 year
- If the candidate is self-employed, then the balance sheet of their company duly audited by a professional Chartered Accountant for 1 financial year, is required
- Any business certificate, be it a GST certificate or a Pan card
- Property tax receipts that are completely up to date
- Documents of the property such as lease deed or sales deed
To sum things up, it becomes a cakewalk for candidates to apply for a mortgage loan and also bolts up the process for its quick approval with the help of a proper guide.
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