In India, mortgage loans are the most common way through which ordinary people generate finances. These mortgage loans come with various benefits and features, which makes it very attractive to people.
Almost all banks and financial institutions offer these secured loans against the property of the borrower. The bank then provides loans which range from 70 to 90% of the property value.
Various banks and financial institutions provide multiple types of these secured property mortgage loan which come under the category of mortgage loans.
Below is the list of such loans:
Home loan
It opted by people who are planning to buy or build a new house, and it is one of the most popular mortgage loan. It can be used to buy land, buy a house or even build a house. The loan amount can also be used even for home renovations.
The home loans are usually given for a longer tenure like 30 years with interest rates varying from bank to bank. The borrower can use these home loan funds only for the house and not for other personal purposes.
Loan against property
Banks, financial and non-banking institutions provide loan against property (LAP) also known as loan against land. The documents of the property are kept with the bank until the loan is fully paid.
The loan repayment can be made through EMI payments during the loan tenure. Unlike home loans, the funds generated under this property mortgage loan can be used for personal and commercial purposes.
Commercial purchase loans
Commercial purchase loans are used by businessmen and entrepreneurs to buy commercial properties. These commercial properties can be office space, factories, etc.
Banks offer commercial purchase loans at attractive interest rates in order to attract customers. But unlike LAP, funds from this loan can be used only to buy commercial properties.
Lease rental discounting
If people have more than one house or commercial space, than they give it on lease. Such people also can get property mortgage loan against these leased properties, which are known as lease rental discounting.
The rental amount can be given as EMI on a monthly basis to repay this loan. The bank requires the lease agreement of the property to determine the loan amount and tenure of the loan.
Top up loan
Banks offer this on the property that is already under a mortgage. Top up loan or second mortgage loan can be given by banks on non-banking financial institutions (NBFC) on the basis of the borrower’s credit score and previous loan payment history.
The borrower can repay the top-up loan along with the first mortgage loan or by opting for an additional tenure.
Reverse mortgage
It’s a special type of mortgage loan for senior citizens who wants to have a steady income after retirement. They can mortgage their property for a reverse mortgage loan, and banks will give them regular amount very month like an EMI.
Upon the death of the senior citizen, the legal heir has to pay the amount to bank. Else the bank will sell the property to recover its amount and give the remaining amount to the legal heir.
