Answers to the Most Asked Questions on Loan against Property

Loan Against Property FAQs Expert Answers

Loan against property is a multipurpose secured loan that is offered by the financial institutions while holding a property that you own as collateral. By using the property you own as collateral, you can easily procure about 60-80 percent funds of the market value of the property. While the property is mortgaged to a lending institution while you apply for a loan against a house, you can still continue using it for commercial and residential purposes. These kinds of loans make financing easier.

If you are considering taking a loan against property, then here are some of the common questions asked by the applicants answered.

1 – How is a Loan Against Property and a Home Loan different from each other?

A home loan is one that is secured by lending or a banking institution for the purpose of purchasing a residential property. A loan against property on the other hand is a multi-purpose loan that can be availed by leveraging real estate for securing funds for any purpose ranging from expanding your business to funding the higher education for your child.

2 – Are there any benefits of taking a Loan Against Property?

One can avail of a much lower mortgage loan interest rate in comparison to personal loans or gold loans. The funds available while taking a loan against your property in comparison to a personal loan is significantly higher. An applicant can also avail a longer tenure while taking a loan on property. However, you need to remember that the mortgage loan rate charged and also the tenure will be decided on the basis of various factors such as the amount of loan sought, your property valuation, salary, and other factors. Also, banks and other lending institutions charge a lower processing fee on loans taken against the property.

3 – What are the Eligibility Criteria to avail a Loan Against Property?

Although the loan against property eligibility varies from one banking institution to another, there are some criteria common to all of them. The loan can be availed by any salaried or self-employed professional. The co-applicants can be either partnership firms or close relatives. Some institutions do not grant loans to NRIs. Also, maintaining a good credit score is a must if you want to avail a loan against land or property.

4 – What kinds of Properties are Eligible for getting a Loan Against Property?

There is a myth that loans against properties are offered only over residential properties. However, banking institutions accept loans over a myriad of properties including commercial and residential use properties. In fact, any plot of land that has not been constructed can also be considered as collateral for securing a loan.

Here are some of the following properties that are commonly accepted as collaterals.

  • Commercial or rented residential properties
  • Self-occupied apartment, or residential property
  • Commercial property such as complexes, malls, shops, offices, etc.
  • Shared property
  • Any plot of land under your ownership

You cannot avail of a loan against property under the following cases.

  • Property outside municipality/city limit
  • Property with tenants for over 5 years with no renewed rent agreement
  • Property constructed on farmland or agricultural land
  • Illegal properties or for properties already mortgaged with other banks
  • Hostels, hotels, or schools
  • Industrial property

5 – What Documents do I require to Apply for a Loan Against property?

The documents requested by banks vary from one institution to another and also depending on whether you are a salaried or self-employed individual. You can check the documents for loan against property online from the official website of the lending institution you are applying to. In general, you will be asked for,

  • Identity proof
  • Residence proof
  • Salary slips
  • Income tax returns or proof of income
  • Cheque covering the processing/administrative costs
  • Credit score reports
  • Bank statements
  • Balance sheets of your company

6 – Can I get a Mortgage Loan without submitting any Proof Of Income?

Your income is a key determinant in assessing your eligibility for a loan against your property. In fact, your mortgage loan rate is also dependent on your income. You need to furnish your latest salary slips and/or your IT returns. Without producing valid proof, you would not be eligible for the loan. You can also try to apply with a co-applicant with a better credit score and track record thereby convincing the bank about the timely repayments without defaulting. Some financial institutions determine your rate of interest of loan against property depending on your income. Hence, it is vital to produce income proof for securing a loan.

7 – Is a Loan Against Land or Property Taxable?

The taxability of a property you want to secure a loan against is entirely dependent on the purpose of the loan. If you are using the amount for personal purposes like the education of your child or for marriage, then you cannot claim tax benefits on the interest. If you are using the money for funding another house or property, then the same can be claimed under Section 24(b) of the Income Tax Act.

8 – How to Calculate EMI for Loan Against Property?

You can do the calculations on your own by checking the interest rate that the bank is charging you. Alternatively, you can use an EMI calculator for loan against property for estimating the EMI charges. You can access the calculator from the official website of the bank you are applying to. Furthermore, you can checkout Apnapaisa loan against property details to compare the rates of interest charged by various banks, gain access to the EMI calculator, and get relevant information about loans against properties.