What Factors We Should Consider While Choosing Mortgage Loans? - Loan Trivia


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Thursday 23 June 2022

What Factors We Should Consider While Choosing Mortgage Loans?

Property loan Interest rate

A mortgage loan such as a loan against property is an ideal form of financial assistance that borrowers can receive by pledging their immovable assets as collateral. It offers a high quantum loan amount at nominal interest, flexible repayment tenor, and other lucrative benefits.

However, to reap the benefits of this loan option, borrowers must know the different factors before availing of a mortgage loan. Thorough research helps one make an informed decision and enjoy a stress-free repayment.

What factors should we consider while choosing mortgage loans?

Eligible borrowers must factor in the following points before applying for a loan against property –

  1. Loan quantum: Lenders offer a substantial amount by evaluating the property's market value. As per RBI’s guidelines, one can get up to 75% of a property’s value as credit. Borrowers need to choose a lender who will offer the highest loan value as per the mortgaged property. Therefore, one needs to take into account the LTV ratio.

  2. Interest rate: Borrowers must compare various lenders and then settle for the one offering an affordable interest rate. Property loan Interest rate depends on loan tenor, loan principal, income status, etc. Additionally, the affordable interest rate makes borrowing cost-effective.

  3. Loan tenor: Another critical parameter that debtors must consider while availing of mortgage loans is choosing the right repayment tenor. Most lending institutions will offer a flexible repayment tenor, which helps the borrower to repay the loan amount. A longer tenor may reduce the EMI amount; however, this increases the cost of borrowing and vice versa.

  4. Tax exemption: Borrowers cannot avail of the tax benefit under a mortgage loan unless they are using the sanctioned amount for construction/ renovating their house, educational purposes, or business expenses.

  5. Additional charges: Borrowers often forget to factor in the additional charges like processing fees, service charges, statutory charges, penal interest etc., while calculating the cost of the loan. These additional charges impact the cost of borrowing to a great extent. Hence, borrowers must count on these charges before availing of loan against property.

Furthermore, borrowers must have a decent credit score and submit relevant documents related to a borrower and the property to be mortgaged to complete this process.

To sum up, a mortgage loan is an excellent source of acquiring funds. The most standout feature is the fund can be used to meet any financial expenses.

Must Read: Things To Consider While Taking A Loan Against Property

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