Property loans have turned out to be one of the most sought-after financing options for households as well as businesses due to their favourable features for both. For one, a loan against property does not come with any restriction to end-use, which makes it suitable for funding all types of expenditures, both personal and professional. Next, the total financing availability primarily depends on the value of property a prospective borrower owns for mortgage.
These loans are also long-term advances repayable over a tenure of 15 to 20 years. It only works in the borrower’s favour, allowing him/her to choose a term that keeps the loan most affordable. However, as high-value advances, these loans also vest the borrower with critical responsibilities towards repayment over a long term, which makes it all the more crucial to know all the financial intricacies when borrowing a property loan. Here’s a look at them one by one.
Interest Rate Differences
While a loan against property, as a secured loan, often attracts low rates of interest, such rates can vary from one lender to another. It is primarily due to the benchmarking system that lenders follow for interest rate determination, which differentiates one rate from another. Financial institutions may also set different rates depending on their internal policies. However, these rates are checked by the internal/external benchmarking systems followed, commonly known as MCLR and RLLR systems. Often, lenders following the RLLR system have their loan against property rates of interest set a notch lower. Than MCLR-based system due to direct rate linking with the repo rate.
The primary scope of understanding here is that even though the rates differ marginally from one lender to another. The payable interest accumulating on the loan principal can be significantly different. Due to the long term and the loan quantum involved. It thus becomes all the more critical to compare interest rates. And find a lender that offers the lowest rates on your property loan.
Further, selecting suitably between fixed and floating rates can also make a significant difference in your total interest payable. Usually, fixed rates are set a niche higher than floating rates.
Also, utilise your financial credibility to borrow the loan at the lowest rates through lender negotiation.
Loan to Value Ratio
LTV or Loan to Value Ratio determines the total loan availability as a percentage of the current market value of property to be mortgaged. With some of the best lending institutions, LTV can go as high as 85%. So, in case the property is valued at Rs.5 Lakh, an eligible candidate can expect to avail financing up to Rs. 4 Lakh through a mortgage of such property. It is ideal to look for a lender offering the highest LTV so that your financing requirements are optimally fulfilled.
Type of Property for Mortgage
When availing a loan against property, you should also consider providing the type of property as mortgage as it can impact your total loan availability. Lenders usually accept both residential and commercial properties as a mortgage for the purpose of property loan financing. However, the financing value available can differ for these two types of properties even though their current market value stands the same. It is primarily because of the saleability and demand for such properties in the given area. sakarya escort bayan
Further, the availability of total funds also differs with the amenities available and attached to the property. Plus its location and accessibility from different places, which impacts its saleability and valuation. Thus, if you hold two or more mortgageable properties. It is always suggested to opt for a property that is well-located with necessary amenities, and is accessible from nearby places. Which ultimately makes it more saleable than otherwise, leading to high valuation.
Borrowing as Per Need for Funds
Prospective borrowers looking for lump sum funding may often fall for availing as much. Financing as available based on their eligibility and the property to be mortgaged. However, such practice is not appreciated, both by lenders and in the sense of disciplined financing. It is because it not only loads your finances with a long-term repayment responsibility. But also creates unnecessary burden that could have been managed with smaller funds. sakarya escort
So, even though you are eligible for a high-value loan as per your eligibility and valuation of the property you own. It is ideal to apply for a loan amount only as much as fulfills your funding needs. escort bayan
Keeping these aspects in mind, you must also check other rates and charges levied on your loan against property. Also, ensure to provide all primary and secondary income documents, which should make you eligible for suitable financing. Allowing you to choose a tenure that keeps repayments affordable. Make sure to negotiate with your lender before agreeing to loan sanctions and signing loan agreement. escort