Loan against property is an excellent way to deal with the expenses of your project. The capital borrowed can be used for undergoing a wide array of diverse projects starting from home construction, home extension, buying a property, children’s education, etc. The loan against property market has emerged as a popular source of raising capital for retail borrowers and is supposed to be worth Rs 5 lakh crores as per a leading credit bureau. There are a few things that the borrowers must keep in mind to get the best out of loan against property scheme.
Perform a detailed comparison of the available options
It is quite mundane for people to fall for the first option that they come across. Doing so might check them from exploring the other better options available in the market. There are various financial institutions offering loans against the property at varied terms and conditions. It is recommended to put all the options in front and go through each one of them side by side to pick the one that best suits your interests. This will ensure that you have the most lucrative deal available in the market, leaving no scope for remorse in the future. You can take the help of some websites which can provide you with detailed analysis and comparison between loans against property interest rates offered by different lenders, to make your job easier and faster.
Check your eligibility
Each financial institution generally has a little variation in the eligibility criteria for applicants applying for a loan against property. Make sure to have a thorough reading of the mentioned criteria of the particular loan against the property scheme offered by the lender. This can ensure that your application for the loan against property does not get rejected at a later stage of verification.
Have a rough estimation of the required amount
It would be wise to have a gross evaluation of the capital required for the project that you are willing to undergo. This can give you an upper hand in deciding the amount of loan that you should apply for, to take care of the expenses of the project. Since the rate of interest on the loan is directly dependent on the loan amount, applying for a redundant loan amount will lead to a rise in the interest payments for the loan and a higher equated monthly instalment. Hence, it is recommended to carefully evaluate the funds necessary and apply for a loan against property.
Criteria for the mortgaged property
Loan against property asks for a property as a mortgage against the loan amount. Generally, financial institutions accept the commercial and residential property as a mortgage, but some lenders might have a few more specifications about the property they accept as a mortgage. For instance, some lenders might want you to ensure the property first before pledging it as collateral. Hence make sure to go through the terms, to find out about the criteria of mortgaged property set by the particular financial institution.
Look for hidden add-ons
A lot of times the lenders have some value-added services attached to the loan which might increase the value of the loan. It is important to go through the add-ons first, to figure out the one that you really need. This will help you save some bucks by checking on only the ones that you require and deselecting the rest.
Maximum approved loan amount
The maximum value of the loan amount that a borrower can sanction relies on the loan to value ratio set by the particular financial institution. Generally, the ratio is set to 75%, i.e. you can avail up to 75% of the total value of the property that you have mortgaged. Hence look for the LTV ratio first, to estimate the maximum amount of loan that you can avail, to adjust the budget of your project.