A mortgage loan is a type of loan in which you secure funds by pledging your property. The interest rates on mortgage loans typically range from 8.75% to 13.35% p.a. The amount of funding you can avail will be up to 60% of the registered value of the property with some banks also offering mortgage loans up to Rs.10 crore. The repayment tenure for mortgage loans can be limited to 15 years in comparison to the long tenure of home loans.
There are several factors one should consider before taking up a mortgage loan which are:
- Risk-based interest rates:
Risk is one of the basic factors that affect your interest rates on land mortgage loans. NBFCs might feel that there’s always a chance the borrower will fail to repay his or her debt. Hence financial institutions do charge higher interest rates than borrowers with lesser risk.
- The credit score:
Credit scores are based on the information your credit report holds; in other words, your borrowing history. If you pay all of your bills on time and can maintain relatively low credit-card balances, you may have a good credit score. Alternatively, people who routinely make late payments or skip payments have lower scores.
- The size of your down payment:
The amount of money you contribute as a down payment on loan can also influence your interest rate. Note that a larger down payment can result in a lower loan-to-value (LTV) ratio. This also reduces the risk level for the lender. Likewise, a smaller down payment results in a higher LTV, and could, therefore, result in a higher mortgage rate.
- The type of property you’re buying:
You can also use a mortgage loan to buy a different home or property. Note that there are different types of properties which have different risk levels associated with them, based on the historical likelihood of default. So, by all means, the kind of property you are buying can also affect your mortgage rate.
- The amount of money borrowed:
It is a no-brainier that larger loans are riskier than the smaller ones because there is more money involved and therefore a larger potential for loss.
Due to this, borrowers who use conforming loans often qualify for lower mortgage rates than those who use a more massive amount of loans.
- Pre-closure of loan:
You can get a lower rate on your mortgage loan by paying a little more money upfront, at closing. Such practics is a commonly used technique used by borrowers who wish to minimize their long-term interest costs.
- Looking around for the best deal:
When it comes to mortgage loans, there are several banks & NBFCs which offer competitive interest rates on land mortgage loans for the benefit of the consumers.
Eligibility for Mortgage Loans:
To get approval for a mortgage loan, you need to fulfill the eligibility criteria set by banks and financial institutions. While the requirements may differ from bank to bank, listed below are general factors that determine your eligibility:
- Gross annual/monthly income
- Minimum age requirement – 21 years
- Valuation of your property
- Income proof documentation
- Existing liabilities
- Number of dependents
Conclusion: Note that the type of borrower who can apply for this loan varies from bank to bank. For example, most banks offer this loan for both salaried and self-employed individuals. Resident Indians & NRIs are also eligible for a mortgage loan. Such type of loans helps in buying properties which do not qualify for home loans and also enable the borrowers to get funds from the financial institution at a rate of interest lower than the personal loans.