5 Essential Tips For First Time Mortgage Buyers
The market for loans against property in India has witnessed a growth of 33% in terms of the number of accounts in 2018. There are about 16 Lakh mortgage loan accounts currently present in the country.
Loans against property are gaining popularity among borrowers due to its attractive benefits.
There are no restrictions on the usage of such loans, which make them ideal to finance varied expenses such as weddings, higher education, medical emergencies, etc.
What is a Mortgage Loan?
A mortgage loan is a credit availed against a property mortgaged as collateral.
A mortgage refers to the transfer of interest from the owner to the lender.
The latter reserves the right to liquidate the mortgaged property if the borrower defaults on the repayment.
Loans against property and home loans are among the most common mortgage loans availed in India.
Both are secured and come with low-interest rates while offering high loan amounts.
However, only loans against properties come with zero end-user restrictions so the borrower can utilize the loan amount as per their requirements.
5 Tips To Follow To Make The Most Out Of A Loan Against Property
- Avoid Over-leveraging
Loans against property allow borrowers to avail of a high loan amount against collateral.
Interest rates for such loans are also lower than other forms of credit.
The repayment capacity of a borrower is determined considering the current income and the proportion of that spent on monthly installments.
Termed as FOIR or Fixed Obligation to Income Ratio, financial institutions can charge a higher interest rate if the proportion exceeds 50%.
Over-leveraging or applying a too high loan amount leading to just as high EMIs is one of the most crucial things to avoid while availing a loan against property.
- Compare The Lenders On Various Parameters
Borrowers should compare the interest rates from different lenders before availing loans against property.
They can compare the rates offered by lenders easily online.
However, they should also compare other parameters like processing fees, foreclosure charges, late penalty fees, etc.
These factors add to the overall cost of a loan. A borrower should take into account all the parameters before they apply for a mortgage loan.
- Opt For A Short Tenor
Tenor in case of loans against property can range up to 20 years. Borrowers can be tempted to avail of a long tenor as the amount for the EMIs will be less. However, the total cost of the loan increases in that case.
Also, the floating interest rates are more likely to increase as India is in a state of inflation.
RBI can increase the rate of repo rate to control inflation, which in turn can increase the interest rate for loans against property.
Borrowers should opt for a short tenor to get a minimal impact from this change.
- Opt For Foreclosure If Possible
Borrowers also can opt for part pre-payment and foreclosure to reduce the total loan amount when they have surplus funds.
Reducing the number of outstanding loans or foreclosing reduces the total cost of the loan.
A borrower should opt for a lender with the easiest terms for part prepayment and foreclosure.
Bajaj Finserv is one such NBFC that provides loans against property with no part prepayment and foreclosure charges.
Some of the other features that they offer include-
- Loans up to Rs. 1 Crore and Rs. 3.5 Crore for salaried self-employed individuals respectively.
- Flexible tenors.
- Easy balance transfer facility.
They also provide pre-approved offers to avail such loans quickly in a hassle-free manner.
Pre-approved offers cover various financial products like home loans, business loans, personal loans, etc.
You can check out your pre-approved offer by sharing your name and phone number.
- It Can Be Used To Consolidate High-cost Loans
A property loan can be one of the best ways to effectively pay your existing loan.
It comes with lower interest rates compared to other forms of credits and hence is very useful in reducing the financial burden.
Borrowers can make a list of all their existing loans and avail such a loan with a lower overall cost.
Borrowers should properly plan before opting for consolidation.
They should not end up taking an amount which is far greater than they require because it can end up increasing the financial burden on them.
It is also suggested to use the mortgage loan calculator before applying for the loan.
Just need to fill the information on the loan amount, tenor and rate of interest and proceed to get EMI amount.
These were the 5 essential steps to follow for a first-time mortgage loan borrower.
Make sure that you fulfill the required eligibility criteria before you apply for a loan.
Category: Mortgage
