Mortgage loans can be immensely beneficial when you need enormous loans. However, the reason for availing a mortgage loan will differ from person to person. If you are an owner of a property, you can avail of mortgage loans at considerably lower interest rates.
This article will work as a quick guide on mortgage loans. We will be discussing what a mortgage loan is, how it works, and other additional factors. Please continue reading to know more about it.
Mortgage Loan – What is it?
A mortgage loan is a secured loan that you can avail against personal or commercial property. Whenever you avail of a mortgage loan, you must hand over the documents of your property to the lender. And just like other loans, you need to repay the loan amount with a fixed rate of interest.
It would be best to remember that the rate of interest may vary according to various factors. And also, you will have to repay your loan amount within the stipulated time provided to you by the lender.
Mortgage Loan – How Does it Work?
Mortgage loans are acquired when people require a considerably large amount. It is easy to receive the approval of a mortgage loan because it is secured. In other words, the lender gets to keep the borrower’s property as collateral. And if you fail in repaying the loan, you will be penalized, and the lender will keep your property.
In the initial stage of repayment, you need to pay more significant portions of EMI. So as the EMI increases, the principal amount decreases. There are various loan repayment methods, and you need to check them thoroughly before availing a mortgage loan.
Types of Mortgage Loans in India
If you want a sizable loan amount at a low interest rate, you can opt for a mortgage loan in India. The different types of mortgage loans in India are as follows:
- Simple mortgage: In this case, the borrower has to mortgage an immovable asset to avail a loan. The lender can sell off the property if the borrower does not stick to the repayment terms.
- Usufructuary mortgage: The possession of the property is transferred to the lender. The lender can rent the property and profit from it without creating a liability on the borrower.
- English mortgage: A personal liability is established on the borrower and the property is transferred to the lender’s name. Only successful repayment of the loan amount can result in recovery.
- Conditional sale mortgage: The property is sold on terms that it becomes effective only if the borrower fails to repay the amount within the tenure.
- Title deed deposit mortgage: The borrower deposits the title deed of their property to the lender to take a loan against it.
- Anomalous mortgage: An anomalous mortgage does not belong to any type of mortgages discussed above.
Mortgage Loan – What is Eligibility for Acquiring?
To know if you are eligible for a mortgage loan, you need to assess the market value of your property. Besides that, you also need to consider other factors. Make sure you look into the fact that you will repay the mortgage loan that you will avail. And the eligibility criteria vary from lender to lender. Some of the essential eligibility criteria are:
- You must have a good credit history
- You must have a minimum income for repaying your mortgage loan
- You must have all the mortgage loan documents handy.
You can also know the mortgage loan eligibility from the financial institution you are availing loan.
Mortgage Loan – What are the Benefits?
Mortgage loans will immensely benefit you in the long run. These loans are most attractive and on-demand because of various reasons. Some of the benefits of mortgage loans are:
● Long Repayment Tenure
Unlike other loans, mortgage loans have a higher tenure for repayment. Most banks or financial institutions provide a term of fifteen years for repaying the loan amount. This tenure is more than enough for repaying the borrowed money.
● Lower Interest Rate
Unlike other loans, the interest rate of mortgage loans is meager. However, you need to pay an additional tax amount while you repay the loan. If you opt for a floating interest rate on a mortgage loan, the amount varies from 0.5-2%. The interest amount in a floating interest is often lower than the average fixed rate of 30 years.
● Enormous Loan Amount
Whoever requires enormous loans opts for mortgage loans. The market value of your property will determine the loan amount.
● Can be Used for Multi-Purpose
Since mortgage loans are secured loans, you can use the money for various purposes.
● Lower EMI Rates
As the repayment tenure is longer for mortgage loans, thus the EMI rates are considerably lower.
To Conclude
Mortgage loans are always at your rescue whenever you have a substantial financial crunch. With a longer repayment time and lower interest rates, you can use the loan for various purposes.
