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Finance

What is a Mortgage – Process, Parts & Types

The current trend of the Indian credit market shows that mortgage loans are gathering more attention among prospective borrowers when compared to their unsecured counterparts. Owing to their customer-friendly benefits such as high loan amount, affordable interest rate, easy eligibility criteria and other loan terms, this financial product is a popular one compared to others.

Nevertheless, before availing one, it is imperative to know more than mortgage meaning to make a knowledgeable decision.

What is a mortgage loan?

If you are still unclear regarding what is mortgage, consider it as a credit availed after collateralising an immovable property. The lender will extend an advance based on the current valuation of the collateral. Here, the advance is usually sanctioned against immovable properties like a house or land, and lenders keep possession of this particular property’s deeds until the full loan amount is repaid.

The process of availing of a mortgage loan has now become easier with the introduction of online application. Here is a detailed step-by-step guide –

Step 1: Visit the official website of a lender.

Step 2: Fill up the application form properly with relevant personal, professional and property details.

Step 3: Based on this initial application, the lender will calculate loan eligibility, and they will either approve or reject it.

Step 4: Once they approve a mortgage loan application, company representatives will contact applicants to complete the remaining process. It includes submission of necessary documents, property verification and valuation.

Step 5: Following successful verification, financial institutions will approve a loan application and initiate the disbursement process

Along with the application process, one should also know the factors that affect their property valuation. Here are some factors that play a role –

  • Location
  • Amenities
  • Infrastructure
  • Connectivity
  • Type of property, commercial or residential
  • Property size and layout

Apart from being aware of the details of the application process, one should also be aware of the different parts of a mortgage loan.

Parts of a mortgage loan

  1. Principal amount: Principal refers to the actual amount that a borrower has taken as a credit. This figure does not represent the market value of a property. For instance, if a property has a market value of Rs.1 crore, and the lender offers an LTV ratio of 85%, then the loan principal amount can be up to Rs.85 lakh.
  2. Interest rate: Mortgage loan interest rate is another essential part of this financial product. This rate alters with every lender, so it is ideal to evaluate it beforehand before applying.
  3. Additional charges: Another vital part of any mortgage loan is the additional charges. One needs to pay charges like legal fees, processing charges to complete the application process, and pre-payment charges, and foreclosure charges are some other notable fees.

These parts of mortgage loans are universal, and they remain constant throughout every sub-type of this financial product. Loan against property, home loans, land purchase loan, etc., are some notable mortgage loan types.

Need to start a new business? Want to get the higher education of your child? Is medical treatment costly? Which you will not be able to afford, a LAP Loan may be your most feasible option as it offers ample finances. You can avail this loan by pledging your property with a lender. The lender will sanction a loan as a certain percentage of the market value of the property. Now that you know how to apply, compare different mortgage loan interest rates and select the one with the lowest interest as well as other beneficial features.

Among these subtypes, LAP is a popular financing method, owing to its wide range of benefits. However, one should also know the important do’s and don’ts of this financial product before applying.

Benefits of a loan against property

Here some common benefits of a LAP loan –

  • High loan amount: The loan amount for this financial product can rise to crores depending on the property’s valuation. Financial institutions evaluate the current market price and then decide the amount based on the loan-to-value ratio. Debtors can also use the loan against property calculator to find this amount beforehand.
  • Restriction-free usage: A notable advantage of this financial product is that it comes with no end-use restrictions. Thus, one can use it for an array of purposes.
  • Low-interest rate: Being a secured financing method, the property loan interest rate is low when compared to other financing methods that extend restriction-free usage.
  • Simple eligibility norms: Moreover, the eligibility criteria for this financial product are lenient, and one can quickly meet them to qualify for a loan against property.

Apart from these, the availability of pre-approved offers expedite the loan application process and saves time. It is applicable to other financial products like loan against property, home loan, etc. Borrowers can check their pre-approved offers by submitting their contact details.

Understanding more than just mortgage meaning is essential to learn more about this financial product and how it can help a borrower.

Must Read : Advantages of Using Credit Card

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