Loan Against Property

A Loan Against Property (LAP), often known as a mortgage loan, is an amount secured by an asset that is kept by the lender until the loan is repaid. This property could be residential, commercial, or industrial. You can get a large loan amount with a low-interest rate starting at 8.20 percent p.a. with a property loan. Lenders often approve a mortgage loan between 50% and 70% of the property’s market value, which you may easily repay over the course of 20 years in EMIs. LAP Loans, or loans against property, are similar to unsecured personal loans in that they can be used for both personal and business objectives other than speculative.

IIFL Loan Against Property
Motilal Oswal Home Finance
Tata Housing
HDFC Bank Loan Against Property
DBS Bank Loan Against Property
Indian Bank Loan Against Property
Bank of Baroda Loan Against Property
ICICI Bank Loan Against Property

The benefits of a loan against property

The benefits of loans against property vary across different lenders and loan schemes. However, some of the common mortgage loan benefits are as below:

  • Flexible End Use: Like a personal loan, a loan against property can be used for both personal and business purposes other than any speculative use
  • High Quantum of Loan: A mortgage loan is secured against a high-value asset, which gives you access to a high loan amount, helping you meet your high-end expenses with ease
  • Balance Transfer Facility: A mortgage loan also comes with the feature of balance transfer, allowing you to refinance your existing mortgage loan to another lender giving lower interest rate or better loan terms
  • Tax Benefits: Interest paid for the loan against property provides tax benefits under Section 37 (1) of the Income Tax Act, 1961. If the loan amount is used for financing a new house purchase, the interest paid on the loan will get you tax benefit of up to Rs. 2 lakh under Section 24 of the Income Tax Act
  • Low-Interest Rate: The interest rate on a secured loan is lower than the interest rate on an unsecured loan. This makes loan against property a cheaper and a better alternative to personal loans
  • Flexible Tenure: The tenure of loan against property usually extends to 20 years, giving you the benefit of lower EMIs and greater flexibility in repayment

Rate of interest for loan against property

The interest rate is a major determinant of the entire cost of your property loan. Because a loan against property is of greater value and has a longer-term, the interest rate can have long-term financial consequences for borrowers. Taking advantage of low-interest rates on a loan secured by real estate will lower the EMI as well as the total interest paid. As a result, potential borrowers should seek a mortgage loan with the lowest available interest rate. Citibank now has the lowest rate on a loan against property, starting at 8.20 percent per annum. The exact rate of interest on your property loan will, however, be determined by your lender, credit profile, and loan size.

Eligibility for loan against property

You must meet the required eligibility conditions to qualify for a loan against property. While the eligibility criteria for obtaining a loan against property vary per source, the following are some typical requirements that need to be met:

  • Residential Status: Resident Indian and Non-resident Indian
  • Minimum Age Limit: 18 years
  • Maximum Age Limit: 70 years
  • Employment Type: Salaried, Self-employed Professional, and Self-employed Non-professional
  • Minimum Salary: At least Rs. 12,000 per month
  • Net Annual Income: At least Rs. 1.5 lakh per annum
  • Work Experience: At least 1 year in the current organization
  • Eligible Loan Amount: Up to Rs. 25 crore
  • Loan to Value: Up to 75% of property value
  • Credit Score: Preferably 750 and above
  • Property Type: Residential, Commercial, and Industrial

Use a loan against property EMI calculator before applying for a mortgage loan to figure out how much EMI you can afford for a certain loan amount, interest rate, and term. Your monthly costs should not be impacted by your loan against property EMI. When you’ve found an EMI, loan amount, and tenure that you like, click the Apply Now button to start the loan against property application process.

Documents required when applying for loan against property

Lenders need a list of documents when you apply for a mortgage loan in order to analyze your loan repayment capacity and confirm that any information you provide is accurate. This list of documentation will vary from one lender to the next. It may also differ depending on your scheme, kind of resident, and type of job. However, the following are the most frequent documents needed to apply for a loan against property:

  • Duly filled loan against property application form
  • Passport size photographs
  • Proof of Identity (Passport Copy /Voter ID card /Driving License /PAN Card)Proof of Residence (Ration card /Telephone Bill /Electricity Bill /Rental agreement /Passport copy /Bank Passbook or Statement /Driving License)Proof of Age (PAN Card /Passport /any other certificate from a statutory authority)
  • Bank Statements (Bank statement /Bank Passbook for the last 6 months) OR Last 6 months salary slips.
  • Form 16
  • Income Tax Returns for the last 3 years
  • Processing Fee Cheque
  • Documentation related to the property offered as collateral

Additional Documents Required for Mortgage Loan:

  • For Self Employed: Income statements and other financials for the past 2 years attested by a CA
  • For SMEs: Audited financials for the last 2 years

Use of loan against property EMI Calculator

It is a good idea to plan for payments before applying for a loan against property. This will help you prevent financial difficulties in the future. ReferLoan offers a loan against property EMI calculator to assist you to organize your finances ahead of time. It’s essentially an online calculator that determines the EMI amount due on your loan. On the basis of a few fundamental loan-related details such as loan amount, interest rate, and tenure, the LAP EMI Calculator provides accurate and quick results.

Prepayment of loan against property

The ability to prepay the outstanding loan amount at any point during the loan term is a unique feature of LAP. Individual borrowers with a fluctuating rate of interest on their loan against property are not charged a prepayment penalty, according to the current RBI rules. Corporate businesses, on the other hand, are still charged a small cost for prepayment. Prepaying your loan helps to reduce the amount owed on the principal.

Some advantages of loan against property prepayments are:

  • Loan terms are shorter: Prepayment of the loan reduces the outstanding balance. This option can be used to shorten the loan term so that you can pay off the debt as quickly as feasible. 
  • Savings on EMIs: Once you’ve paid off your loan, the amount you owe is reduced, and your monthly payments are reduced as well. 
  • Interest costs are lower: When you pay off a loan early, you pay off the principal first, which lowers your interest rate. This aids in the reduction of interest costs. 
  • Loan repayment is easier within the time frame set: It would be simpler to repay your loan secured by the property.