Are you in need of funds for a business venture or home renovation? Taking out a loan against property or LAP loan against your property can be a great option. Don’t let the LAP loan process overwhelm you—read on to get the information you need to succeed.
We’ll take you through the steps in applying for a loan against property, including eligibility criteria and documentation requirements. So that choosing the right mortgage loan finance company will be easy for you. After reading this article, you’ll have the knowledge to secure the best loan possible. Also, it can help you achieve your financial goals.
What exactly does “Loan Against Property” mean?
A loan against property or LAP is a secured loan. Borrowers must provide their residential or commercial property as collateral to the lending institution to avail of this loan. This offers security to the bank or lender. Here, the current market value of the property is determined. The loan amount is calculated as a certain percentage of the property’s current market value. The loan amount can be up to Rs 8 crore, depending on the property’s value.
How much money can I raise against my property?
Lenders typically lend up to 75 per cent of the property’s value. This percentage is the loan-to-value (LTV) ratio. The interest rate will be higher than Home Loan rates but lower than Personal Loan rates. LAPs have a 10-year term, while Personal Loans usually have a 5-year tenure. LAPs are more attractive than Personal Loans because they have lower EMIs due to a lower interest rate. Some reverse mortgage loan in india offer up to 15 years of tenure. This makes LAP loans even more attractive, as longer tenures mean lower EMIs.
What are the important factors to remember when applying for a loan against property?
The key factors to remember when applying for a loan against property are:
Eligibility Criteria
Loans against property have different eligibility criteria than personal loans, sanctioned based on income and other parameters. All lenders consider certain factors for property-backed loans. Income, savings, repayment history (including credit card and loan payments) and property’s market value are considered. The applicant’s age, employment status, and financial stability are also considered before loan approval. Usually, lenders prefer giving a loan against property to business owners or self-employed professionals.
Process Documentation
Along with the application form and other proofs of identity, one must provide proof that they own the property. Also needed is a property evaluation report. It’s essential to verify the documents’ information. The following mortgage loan requirements are required for salaried employees:
- Application with photo
- Valid photo identification
- Proof of residency
- Three recent salary slips or Form 16
- Bank statements from the past six months
- Cheque for processing fee
- Property ownership proof
Documentation may vary for self-employed professionals and businesspeople. The following are essential documents:
- Application with photo
- Valid photo identification
- Address verification
- Proof of business
- Last three years IT returns (self and business)
- P&L and balance sheets
- A business profile is required for entrepreneurs
- Last three years IT returns (self and business)
- P&L and balance sheets
- Bank statements from the past six months
- Cheque for processing fee
- Property ownership proof
Evaluation Process
The lender will process a loan application after verifying an applicant’s documents and determining that they meet repayment requirements. A property visit is usually done to determine the loan’s collateral value.
Costs to be incurred
In addition to the loan’s interest rate, the lender may charge a processing fee and mortgage stamp duty.
Disbursing loans
Loans against property are disbursed after legal approval. Depending on the loan amount, How To Transfer Money From Afterpay To Bank Account a loan can be disbursed in one or two instalments.
Repayment Process
A loan against a property usually takes 10–15 years to repay. There may also be prepayment fees which depend on the interest rate chosen.
Loan transfer procedure
If the customer finds a lender with better terms during repayment, they can transfer the loan. This process may involve prepayment fees. Due to prepayment charges and loan processing fees on the new loan, one may not save anything. Calculating all loan transfer costs before making such a decision is essential.
An Online LAP loan is the perfect option when one needs a large amount of money quickly. But remember, the lender can seize the mortgaged property if the loan isn’t paid on time.
