Loan Against Property: All You Need to Know

In life, we often face new and unexpected financial commitments and obligations. It is for this reason that we might have to look up to friends and family for a quick credit, or in some cases, or approach financial institutions such as banks and online lenders.

If you’re here, we believe you have been thinking about some loan alternatives, to help you meet one or more of your goals, or to fulfil your financial obligations. One of most sought-after options in this context is Loan against Property.

A Loan Against Property is a secured loan, wherein borrowers mortgage their property as collateral to the lending institution.

If you are a self-employed individual, you can use the amount towards the following:

• Setting up a new business
• Expansion of an existing business
• For immediate working capital requirement
• Debt reconciliation
• Purchase of machinery
• Personal purposes such as the renovation of home/office, marriage, education, and so on.

If you are a salaried employee, you may use the amount towards:

• Mortgage buyout/Balance Transfer of existing loan
• Personal expenses such as home renovation, marriage, education, and so on.
• Consolidation of debt
• New investments

Irrespective of the use, to procure this loan, you will be required to mortgage a residential, commercial or industrial property. Against the mortgaged property, you will get a fixed percentage of the actual value of the property, as the loan amount. This concept is known as Loan to Value or LTV, which usually falls in the range of 60% to 90% of the value of the property.

Things to Look Out For:

There are a few aspects you need to sort out to be able to Apply for a Loan Against Property. These are:

• The property must be insured against fire and other calamities, for the entire tenure of the loan. (Your lender may ask you for a proof of insurance on an annual basis).
• The property title must be clear and free of any litigation.
• The property should not have an existing loan or mortgage.

You can avail a loan against the following types of property:

• Self-Occupied Residential
• Rented Residential / Commercial
• Vacant Residential / Commercial
• Shared Property

Eligibility

To assess one’s ability to repay a Loan Against Property, enders usually take into account the following aspects:

• Age – The applicant should be 24 years or above in age, at the time of loan commencement, and must not be older than 65 years at the time of the maturity.
• Income – The applicant must have a steady source of income and should be able to produce proof of the same.
• Property value – lenders give due consideration to aspects such as geographical location, market value, marketability and financial viability of the property before accepting it as a mortgage.
• Credit History – The existing obligations or overdue credit of a person can come in the way of being eligible for a Loan Against Property. The better the credit score, the higher is one’s chance of getting a quick approval.

Eligibility by Profession

For Salaried Individuals

Your Income Tax filing should be regular and you must have job continuity of a minimum of 2/3 years.

For Self-employed Professionals

You could be engaged in one of the following professions:

• Doctor
• Engineer
• Dentist
• Architect
• Chartered Accountant
• Cost Accountant
• Company Secretary
• Management Consultant

Documentation

Now that you understand the loan against property eligibility criteria and its nuances, you will need to furnish relevant documents to the bank or your lender to get the requisite approval.

Documentation for Salaried Employees

Proof of Identity

You must submit any one of the following documents as identity proof

• Voter ID card
• Driving license
• PAN card
• Photo credit card
• Employee ID card
• Defence/Police/Government department ID card

Proof of Income

You must submit any of the following documents as evidence of your income

• Latest salary slip showing all deductions or Form 16
• Recent salary certificate
• Last six months’ bank statement/passbook where salary or income is credited

Proof of Residence

You can furnish one of the below-mentioned papers as your address proof:

• Bank account statement
• Latest electricity bill
• Latest mobile/telephone bill
• Most recent credit card statement
• Latest LIC policy/insurance premium receipt
• Employers letter certifying the current mailing address
• Latest NSC
• Other similar instruments indicating the address or existing house lease agreement

Documentation for Other Applicants

Proof of Identity

Any of the following documents can act as your identity proof:

• Voter ID card
• Driving license
• PAN card
• Photo credit card

Proof of Income

You may submit any of the following documents as evidence of your income:

• IT Returns of last two years
• Computation of income of previous two years certified by a Chartered Accountant
• Recent six months bank statement/passbook where salary or income is credited

Proof of Residence

You will need to submit one of the below-mentioned papers as your address proof:

• Bank account statement
• Latest electricity bill
• Latest mobile/telephone bill
• Most recent credit card statement
• Latest LIC policy/insurance premium receipt
• Latest NSC
• Other similar instruments indicating the address

Now that you are aware of the prerequisites for a Loan Against Property, let the experts at MyMoneyMantra help you through the process.

You can also check the documents required for loan against property.

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 5 million+ happy customers since 1989.