Financing your big-ticket expenditures is easier than ever today with the simplified availability of loan against properties. The interesting features and facilities on these secured advances only make them suitably manageable by all. You can further simply access your loan details through the online loan account access via a simple login and make easy repayments as well. While these aspects run around the management of your loan, property loans are designed based on the stand alone mortgage financing framework which one must know about before borrowing.
So, here we bring some pertinent details related to your property loan to make financing management better for you. Let’s check them out.
The Involvement of a Property Mortgage
Under the mortgage loan framework, the loan against property is available against property mortgaging. It means that you need to provide a defined asset as a collateral for the purpose of raising funds. Such an asset involved is always a fixed asset since the mortgaging framework is based on such asset types.
The availability of collateral allows the lender to secure the loan extended against the risk of repayment default, which ultimately makes the loan a low cost financing avenue for borrowers.
Types of Properties Eligible for Mortgaging
When availing loan against properties, borrowers are required to provide asset mortgages of eligible types only. These properties are classified under two main categories, namely residential properties and commercial properties.
If the aspiring borrower is an owner of both property types, he/she must consider selecting one over the other based on two crucial factors –
- The purpose of finances, whether personal or professional
- The current market value of the property
The use purpose of the loan is considered to keep asset mortgaging aligned. With the nature of expenditure, which ultimately leads to disciplined financing. The second factor, i.e., the property’s current market value allows you to make. The most of the underlying equity in the said asset to raise necessary financing. So, bypassing the use-based alignment. If you choose a property with a high current market value for availing the loan against properties. You can raise high-value funding to meet your financing needs as required.
Presence of LTV
LTV or the Loan to Value ratio is a representation of the total loan availability. As a percentage of your asset’s current market value. For property loans, LTV usually remains high, going up to 90%. Which allows borrowers to avail the required financing with ease. So, in case your Property’s value is Rs.50,00,000, you can easily raise financing of up to Rs.45,00,000. As a property loan based on your eligibility fulfilment.
Now, while a high LTV indicates easy availability of high-quantum financing. It is not always wise to choose a high LTV for your loan. It is because a high LTV makes the loan risk-prone. Which pushes the lender to charge a high rate of interest. Further, a high loan value also means high-value interest payment irrespective of the applicable rate. The two factors thus combine to ultimately make the loan costlier than it was initially set to be. It is thus advisable to borrow on the lower end of the LTV scale to keep your advance cost-effective.
Further, it is advisable to use a loan against property EMI calculator to assess. How much you should borrow based on your financial standing and repayment capacity.
Remember that as a consequence of complete non-repayment, the lender is eligible to make loan recovery through mortgaged asset auction. It is thus always advisable to make your loan against properties repayments in time. Notwithstanding this, it is also quite a financial discipline to maintain timely. Repayments for the purpose of remaining creditworthy and keep the doors open for future borrowing needs.