Home Loan

What Are The Importance Of Mortgage Loans You Need To Know

Borrow
08-11-2023
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Everyone will not have sufficient funds at all times. Sometimes, there will be an urgent need for money to meet the requirement. In that situation, you can think of a mortgage loan. In this article, you will find information about why loans against property are important.

What is a Mortgage Loan?

In simple words, the term “mortgage” means submitting something as a guarantee for availing of a loan. A mortgage loan is a loan against any immovable property. An immovable property for a mortgage loan includes houses and commercial properties. This immovable property will be used as collateral (pledged as security). A mortgage loan is sometimes referred to as a loan against property or claims on property. Banks and other financial institutions generally provide this property loan and are referred to as lenders. These lenders will provide you with the principal loan amount and charge interest for the same. 

What is the process for applying for a mortgage loan?

  • If you require funds to start your business, you can approach banks or other financial institutions for a mortgage loan.
  • You should submit non-agricultural property as a pledge to get a mortgage loan.
  • You also have your house, which is half-built in your town. You can now submit this house as a security (collateral) to the lender.
  • The lender will use this as collateral and will provide you with a loan for 60-70% of the actual value of your property (house).
  • Now you will pay the interest for the amount that you received. If you fail to repay the loan on time, the bank will have the right to sell or auction your property.
  • The bank will get funds from doing so because the bank has the right over your pledged property.

What properties will be accepted under a mortgage loan?

The properties that are accepted to get a mortgage loan are as follows:

  1. Property under construction
  2. Fully-constructed property
  3. Self-occupied property
  4. Rented or unoccupied (vacant) property

Lenders will not accept your agricultural property as a security or collateral for the mortgage loan. Above all, the most important requirement is that the property you use as a pledge/ security should be free from all legal issues.

What is the eligibility to get a mortgage loan?

  • To get a mortgage loan, you must first be an Indian citizen.
  • The property that you submit as a security should be non-agricultural.
  • You must be a salaried or self-employed person to get a mortgage loan. This will be calculated based on your annual income. This eligibility differs from bank to bank and from institution to institution.
  • You must have a good CIBIL score. It is generally advised to have a CIBIL score of more than 700.

What are the advantages of having a mortgage loan? 

  • Loan amount: You can get 60-70% of your property’s value as the principal amount. This is subject to change, and some lenders will even provide 80% of the value of your property.
  • Lower interest rate: The interest rate for a mortgage loan is generally lower when compared to other loans.
  • Usage of funds: The principal amount you get for the loan against a property can be used for personal and business needs.
  • Flexibility in paying interests: Even within mortgage loans, there are a few types (fixed type, floating type, and hybrid type) to repay the interest rate. So you can choose as per your preference and personal choices.
  • Longer duration loan: As the period for a mortgage loan is usually longer (between 20 to 30 years), your EMI will also become lesser. Thus, it is a very cost-efficient option.
  • Pre-closure of loan: If you want to close the loan by paying the amount before the fixed tenure, it is possible. But the lender may charge you some extra amount as a token of penalty. The extra amount charged is subject to changes.
  • Will increase your credit score: Credit score is the most important factor in improving your financial trustworthiness. After availing of a mortgage loan, if you pay the interest regularly, you will definitely have a chance to improve your credit (CIBIL) score.

*Click this link to know more about your CIBIL score and its advantages.

What will happen if you do not repay the mortgage loan on time?

This is the most important thing you must know before taking a mortgage loan. If you fail to repay or do not on time, the lender (banks or other institutions) will take action on your pledged property. As you have pledged your property as a security to the lender, the lender will have the right over your property. The lender may either foreclose your loan or auction your property. So you have to be punctual in repaying the mortgage loan.

The bottom line 

We hope that you are now aware of what exactly is a mortgage loan, its features, and its importance. Always remember that a mortgage can make or break your credit score, which is why you must be very careful while applying for one. Availing of a mortgage loan with Piramal Finance is a safe option. If you have any doubts, contact Piramal Finance, and we will guide you through every process. We are happy to assist you. You can visit Piramal Finance‘s website for more information on home loans and related topics.

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