You’re in dire need of a large sum of money, but it all seems impossible until you consider this one option- taking a loan against mortgage of your immovable property. Whether it’s about expanding your business or getting money for your last daughter’s marriage, your immovable properties can get you large sums without actually selling them.
Moreover, because of the immovability of the property, it’s easier to get loans on these than other assets like businesses, salaries, and so on. These loans typically include flexible payment options, easy documentation, and quick loan approval.
In simple terms, loaning an immovable property means keeping it as a security for a typically large sum of money. The Transfer of Property Act 1882 allows banks to transfer an interest by keeping an immovable property like a house, factory, and so as security, which the bank can seize if the conditions aren’t fulfilled.
Here are the features of such a loan:
- The loan shouldn’t be used for uncertain investments like buying real estate shares or capital investment. The credit is issued mostly for personal purposes like marriage, studies, and more.
- You can’t avail smaller sums under Rs.2 lakh against your immovable property. It’s specifically provided for those looking to avail amounts above 2 lakh.
- The maximum amount of loan you can avail is Rs.5 crore. That might be a hindrance for those looking to home mortgage properties costing higher than that.
- You can only avail loan up to 65% of the immovable property’s market value. Moreover, a prerequisite is that the EMI including loan against property interest rates and the net monthly income’s ratio shouldn’t exceed 50%. The second criteria for setting your loan amount is calculating 36 times of your latest salary. Whichever of the 65% or 36 times of pay is lower will be available to you.
- You can pre-pay the loan any time you get a surplus amount of money. Your bank won’t charge you any penalties on the pre-payment of dues.
- You have a maximum of 120 months to repay the loan to your bank. Ten years is indeed a long time, and one would hardly ask for more.
- Loan against property interest rates is typically around 10%.
Who is eligible for a loan against a mortgage of immovable property?
You’d need to fulfill the following criteria to be eligible to avail loan on your immovable property:
- Salaried employees should earn a minimum of Rs.25,000 per month to avail loan against home mortgage. For all other individuals, the threshold is Rs.3,00,000 per annum.
- Self-Employed individuals, agriculturists, IT assesses, salaried employees, and others engaged in legal activities are eligible for this kind of loan. The said property should either be on the name of the loan or a third party who is ready to guarantee the loan.
- The age of the loan should be less than 65 years at the end of the loan tenure.
This kind of loan isn’t advised if you are going to risk the loaned money as a risk capital because you can end up losing a much higher value than you received. In all other cases, it’s the easiest loan to approve and repay.