Top Questions Answered About a Loan Against Property – Read Here!

Life can be unpredictable, and there is no way of knowing when certain expenses suddenly spring up. Now, these expenses could not be that big of a deal, such as clearing a couple of bills. On the other hand, it is also possible to come across a huge expense, such as a medical emergency. Now, you might not want to use a big part of your savings for this. In this case, applying for a loan against property can be a good solution.

If you are looking to learn more about this loan, look at the following questions surrounding it to gain a better understanding:

  • Who is eligible for a loan against property?

Self-employed as well as salaried professionals can apply for loan against property. There are certain financial institutions that even provide mortgage loans to NRIs if they are living in a country that is on the lender’s approved list and have a good employment status.

  • What is the loan amount you can get by pledging collateral?

The loan amount offered by a lender is going to depend on the value of the property that is pledged as collateral. The lender will evaluate the property’s size, location, age, as well as other factors while determining the loan amount. Many financial institutions cover 60-80% of the property value.

  • Is a loan against property a better alternative as compared to a personal loan?

A personal loan, just like a loan against property, offers the borrower flexibility when it comes to the usage of funds. However, one main reason why many borrowers prefer to go for a loan against property as compared to a personal loan is the interest rate. Since the mortgage loan is secured, the loan against property interest rate is lower than that of a personal loan interest rate. It also offers a higher loan amount, which provides better financial support.

  • What are the documents required for a loan against property?

Loan against property documents for salaried individuals include address proof (driving license/Voter’s ID/passport/bank statements/Aadhaar card), identity proof (passport/driving license/Aadhaar card/Voter’s ID), ownership proof (electricity bill/agreement copy/share certificate/maintenance bill/municipal tax bill), and financial documents (Form 16, last 3 months’ salary slips).

Loan against property documents for self-employed professionals include address proof, identity proof, ownership proof, business continuity proof (GST registrations/shop and establishment certificate/tax registrations for VAT/service tax), and financial documents (bank statement of the past year, audited financials of the past 3 years, tax audit report of the past 3 years).

  • What are the different types of properties that are eligible for a loan against property?

A loan against property can be obtained with a rented commercial or residential, self-occupied residential, vacant commercial or residential, or shared property. Do note that industrial property, plots, property located outside the municipal or city boundaries, property built on farmland or agricultural land, property with an existing mortgage, property used for commercial purposes without authorisation, property with structural flaws, as well as hotels do not qualify for a loan against property.

Lastly, make sure to use a loan against property EMI calculator before applying for the loan. Using this calculator will help in understanding the affordability of the loan’s monthly instalments.