A Brief Look At Mortgage Loan

A mortgage loan is a secured loan where the lender provides you the funds against an asset as collateral. This kind of financing helps the borrower the benefit of availing a higher loan amount and a longer repayment tenor.

A mortgage is generally sanctioned against an immovable asset like a house or a commercial property. The lender retains the asset as collateral until the borrower pays back the total loan amount.

Mortgage loans are broadly classified as-

1. Home loan
2. Commercial property loan
3. Loans against property

A home loan or a commercial property loan can be availed only to purchase a home or a commercial space. Whereas, a loan against property has no such restrictions and can be utilized as per the borrower’s requirements, which can be for higher education, a wedding, a home renovation, etc.

Features of a Mortgage Loan

• The processing is quicker compared to other loans.
• Eligibility criteria– Individuals between 33- 58 years of age if salaried and between 25- 70 years if self-employed are eligible to apply for a mortgage loan. A secured source of income and a good credit history is also called for.
• Minimum documentation- Documents such as proof of your address, KYC, property documents which are to be mortgaged, statements of bank account and salary, and income tax returns are required for the loan to be sanctioned.
• The high amount can be availed- You can obtain a higher amount up to Rs.1 crore – Rs.3.5 crore if you have a secure income.
• Lower mortgage loan interest rates- As compared to unsecured loans, mortgage loan interest rates are lower, which makes repaying easier.
• Workable payment tenors- The repayment tenor for salaried individuals is from 2- 20 yrs and for self-employed, it is from 2- 18 yrs.

 How does Mortgage Loan work?

Mortgage loans are secured loans, where the borrower pledges a property with the lender to avail of the loan. The collateral pledged is withheld by the lender till full repayment of the loan is done. The loan is usually paid back through equated monthly installments or EMIs.

The mortgage loan repayment plan is calculated on the basis of amortization. The EMI value depends upon the mortgage loan interest rates and the principal loan amount.

When the EMIs begin, the interest forms a larger part of your EMIs as compared to the principal amount. Gradually, through the repayment tenure, the principal component of your EMI will increase while the interest value will decrease. The total EMI value will continue to be constant all through the tenure period.

6 mortgage types in India

There are 6 different types of mortgage loans in India.

1. Simple Mortgage

When a borrower simply mortgages his immovable asset to obtain a loan, its called a simple mortgage loan. In case of failure to repay, the lender has the right to sell the mortgaged property.

2. Usufructuary Mortgage

Here, the possession of the property is transferred to the lender who can collect rents or profits from it without creating any personal liability for the borrower.

3. English Mortgage

It sets up a personal liability on the borrower, here the mortgaged property is transferred to the lender on the precondition that with the loan repayment it will be returned to the lender.

4. Mortgage by Conditional Sale

Here, a mortgagor apparently sells his property with terms that it becomes effective if he defaults in repayment but turns void on successful repayment.

5. Mortgage By Title Deed Deposit

The borrower deposits the title deed of the property as the security to be mortgaged with the lender against the loan to avail.

6. Anomalous Mortgage

A mortgage that does not fall under either of the prior mentioned mortgage types is an anomalous mortgage.

These loans are a mix of the above types of mortgage to provide you with the best possible features. Avail them by following a simple Mortgage Loan process.