A loan against property is a type of loan where the lender provides the loan by mortgaging the property. Loan against property can be availed by an existing property owner or a home loan borrower who is planning for the renovation of the home. It is generally taken at a lump sum amount, and thereby, the borrower needs to repay the same over a fixed period at a fixed loan against property interest rate.
The loan against property, in other words, is called home equity and the calculation is done by calculating the difference between the net worth of the house and the current home loan that you have owed from the bank.
Procedure for applying for a loan against property
- First of all, you need to visit the official website of the lender to apply for the loan.
- Secondly, the customer service of the lender will contact and request you to submit relevant documents.
- Thirdly, the lender will verify your application and documents and will also inspect the property of the applicant.
- Lastly, if the lender finds everything satisfactory, they will credit the loan amount to your bank account.
Determining factors for taking a loan against property
If you want to take a loan against property, then go through the following determinant factors:
- People who have an existing property or is a previous home loan borrower can apply to avail a LAP for home improvement purposes.
- It is generally taken for the renovation of the property, and the calculation is done on the basis of the net worth of the house and the current home loan owed by a borrower.
- For taking this type of loan, the person can extend his tenure up to 20 years which relieves the borrower when repaying the loan.
- The repayment for this type of loan involves paying off a fixed interest rate for a fixed time period.
- Before taking a loan against property, one should check the current interest rate.
Documents required to apply for a loan against property
Given below are some of the documents required to apply for a loan against property:
- Proof of address – Electricity Bill, Passport, Aadhaar card, etc.
- Proof of Identity – Driving license, pan card, etc.
- Income proof – Income tax return certificate, sales tax certificate, shop act license, etc.
- Property documents – Property allotment letter, copy of original sales deed, etc.
Benefits of taking a loan against property
- Increase the chances of home loan approval: When you take a loan against property, it increases the chances of your loan approval. The time taken for disbursal of this type of loan ranges from four to five days and the process is comparatively faster because the bank keeps the property as a mortgage against which the loan is granted to the borrower.
- Lower the rate of your EMIs: If you take a loan against the property, you can opt for long tenure for repayment of your loan. The highest tenure for the repayment of the loan is 20 years. Moreover, it will also reduce your EMI payment each month.
- No or low prepayment charges: An individual who has taken a loan against property can enjoy facilities like floating interest rate, nil charges or part payment.
- Low-interest rate: It provides you with the facility of the low-interest rate, which helps in easy repayment of the loan.
To Conclude
Before taking a loan against property for home renovation, it is better to go through the points mentioned above. Also, make a thorough analysis so that it gives you an overall idea before taking a loan against property. It will not only help you with the timely payments of your dues but will help you in making a more accurate decision.