Loan Against Property

Loan Against Property (LAP), also known as mortgage loan, is sanctioned against an asset, which remains with a lender until the loan is repaid. This asset can be a residential, commercial or industrial property. Property loan gives you access to high loan amount at a low interest rate starting at 8.20% p.a. Lenders usually sanction a mortgage loan between 50% and 70% of the property’s market value, which you can repay easily in EMIs stretching up to 20 years. Like unsecured personal loans,LAP Loan or loan against property also can be availed for meeting both personal and business needs other than speculative purposes.

Loan Against Property:Benefits

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

• Flexible End Use: Like personal loan, loan against property can be used for both personal and business purposes other than any speculative use
• High Quantum of Loan: Mortgage loan is secured against a high value asset, which gives you access to high loan amount, helping you meet your high-end expenses with ease
• 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 till 20 years, giving you the benefit of lower EMIs and greater flexibility of repayment
• Balance Transfer Facility: 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

The interest rate is a significant factor that affects the total cost of your property loan. As loan against property is of higher value and longer tenor, its rate of interest can have long-term financial implications on borrowers. Availing low-interest rates on loan against property will reduce the EMI as well as the total interest payout. Therefore, prospective borrowers should try to get a mortgage loan at the lowest possible rate of interest.

Currently, the Citibank offers the lowest rate on loan against property starting at 8.20% p.a. However, the final rate of interest at which you will get the property loan will depend on your lender, credit profile and loan amount.

Top Lenders Offering Lowest Loan Against Property Interest Rates in India

Given below is a table of the latest loan against property rates of some leading banks, NBFCs and HFCs in India:

Mortgage interest rates in the table are subject to the credit/ risk profile as assessed by the lender on the basis of parameters such as credit scores, age and repayment capacity of the applicant.

Loan against property interest rates from all lenders as of 16^th July 2021. Mortgage loan interest rates in the table are subject to change anytime without prior notice.

To apply for a loan against property, you must meet the required eligibility criteria. While the eligibility criteria for availing LAP varies from provider to provider, below are some general conditions that must be fulfilled to apply for loan against property:

Note: The information in the table is indicative, the actual values may vary depending on multiple factors including your credit profile, lender, property and location.

Before applying for mortgage loan, use loan against property EMI calculator to know how much EMI you can afford on a certain loan amount, interest rate and tenure. Your loan against property EMI should not put strain on your monthly expenses. Once you find the EMI, loan amount and tenure that you are comfortable with, click the Apply Now button to proceed for the loan against property application process.

When applying for a mortgage loan, lenders ask for a list of documents to assess your loan repayment capacity and also to ensure that all information given by you is legit. Now this list of documents may differ from one lender to another. It may also vary as per your scheme, resident type and type of employment. However, the common set of documents required to apply for loan against property are as below:

• 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

Note: The above list is indicative. The lender may require additional documents at the time of loan against property application

Before applying for a loan against property, it is good if you plan for its repayment. Doing so will help you avoid financial hassles in future. To help you plan your finances in advance, Paisabazaar presents a loan against the property EMI calculator. It is basically an online tool that calculates the EMI amount payable towards your loan repayment. LAP EMI Calculator gives accurate and quick results on the basis of a few basic loan-related details including loan amount, interest rate and tenure. To know your loan against property EMI,

While availing a mortgage loan, certain charges are levied by the banks or the HFCs to process the loan. This amount varies from bank to bank and should be considered while selecting the financial institution. Let us take a look at these charges. 

• Processing Charge: It is a necessary fee payable at the time of loan application. Even if the loan is rejected, the processing charge would be forfeited by the financial institution.
• Foreclosure and Prepayment Charges: If the borrower wants to pay off the complete loan amount before the due date, it is called foreclosure. In case, the borrower decides to pay a part of the loan amount before time, it is called prepayment. For both prepayment and foreclosure, banks levy a charge on certain categories.
• Other Charges: Some common charges include legal fee, documentation charges, stamp duty, technical evaluation fee, title search report fee, etc.

A distinctive feature of LAP is the flexibility to prepay the outstanding loan amount anytime during the loan tenure. As per the latest RBI guidelines, no prepayment charge is levied in the case of individual borrowers, who have a floating rate of interest applicable on their loan against property. However, corporate entities are still charged a certain fee for prepayment, but it is minimal. Prepaying your loan amount helps to bring down the outstanding principal amount.

Benefits of Prepayment of Loan Against Property

Prepayment of the outstanding amount under Loan Against Property offers various benefits. Some of them are:

• Reduced loan tenure: Prepayment of the loan helps in reducing the outstanding amount. This feature can be utilised in reducing the loan tenure so that you can get over the liability as soon as possible
• Cost-saving on EMIs: Once you have prepaid the loan, the amount to be repaid decreases, thus, the monthly instalments of the loan also go down
• Reduced interest cost: As part of loan prepayment, you pay the principal amount first, which ultimately reduces the interest amount. This helps to reduce the interest cost
• Greater ease of loan repayment within stipulated tenure: Repaying your loan borrowed against the property would become easier 

• Ease for comparing offers: At Paisabazaar, you are saved from the hassle of visiting individual websites/offices of lenders to compare the available personal loan options
• See all possible lenders: At a single platform, you can see all of the possible lenders (both banks and NBFCs), who can offer loan against property without affecting your credit history and credit score
• Instant In-principle e-Approval: Get in-principle e-approval for your mortgage loan application in a matter of seconds when you apply online through Paisabazaar.com
• Privacy and Transparency: digitalfinserv.com is ISO 27001-2013 certified for Information Security Management System. Hence, all the Loan Against Property application details are kept private and safe

Q1.  Is it mandatory to have a co-applicant for availing LAP?

A co-applicant for a loan against property is mandatory only when the property being mortgaged is owned by more than one person. In such a case, all co-owners of the property need to apply as co-applicants.

Q2. How is the value of a property calculated?

The market value of a property is estimated in terms of money that it can raise if it is sold at prevailing conditions.

Q3. What types of properties are accepted by lenders providing Loan Against Property (LAP)?

Different lenders have different criteria for the type of property to be accepted against a mortgage loan. However,  mostly all financial institutions accept the residential, commercial or industrial property. It is important to note that the physical condition and age of the property may affect its acceptance by the financial institution.

Q4. What is the maximum loan tenure available under LAP?

Mostly, the tenure of a loan against property goes up to 15 years. However, this may vary from one lender to another.

Q5. Can NRIs avail loans against the property?

Yes, there are several financial institutions that offer loan against property to NRIs.

Q6.  Do banks accept uninsured property to sanction loan against property?

No, in most cases, the property mortgaged to avail a loan against property needs to insured.