Everyone needs some money at some point of time or the other whether for personal or business needs. Though borrowing from friends and family is usually a favoured option for small sums, however, if the amount required is large, then a better option would be to leverage a property or a piece of land you own as a collateral to take a loan against property from the bank.
Among the many banks that offer loan against property, one is Bank of India. The bank was founded in 1906 and currently operates through 4,963 branches, 5 subsidiaries and 54 zonal offices across the country and an overseas joint venture. Bank of India’s primary objective is to provide state of art, proactive and innovative banking solutions to its customers. The bank is one of the leading banking institutions in our country and offers a wide range of products and services catered to various sectors from corporate and SME to rural and retail, among others. One of its finest product is the mortgage loan or loan against property.
Loan against property, also known as LAP, is a loan which helps an individual to get a loan amount against his assets. LAP provides loan against one’s property. It is a perfect way to unlock the value of one’s property and realize one’s dreams.
- It is a multipurpose and most secured loan that can sanctioned for both business and personal needs.
- This loan can also be used for personal purposes like home renovation, wedding, vacations or financing educational courses.
- You can take the loan from BOI even for purchasing a new property by using your existing residential or commercial property.
- The amount secured from these loans can also be used towards renovation or repairs of the applicant’s residential or commercial property.
- The amount secured from these loans can also be used towards purchase of plots/lands for the construction of residential or commercial buildings, or towards construction of houses/flats for residential or commercial purpose. However, these loans are sanctioned only after acquiring the mortgage rights on the mentioned property, by the bank.
- Bank of India also provides takeover of loans, which allows the customer to transfer his existing home loans in other banks to Bank of India at comparatively lower interest rates, subject to the takeover guidelines as laid by the bank.
- The loan amount cannot be used by the applicant for speculation purposes i.e. the applicant cannot use these funds towards investment in equities and other related matters.
- This facility can be availed by all except, builders/promoters or real estate developers who wish to avail loans for the purchase of plots/lands with an intention of selling or holding real estate stock for further sale or resale purposes.
- The loan will be sanctioned only after a suitable declaration regarding the purpose of loan is submitted by the applicant to the bank.
- These loans are issued in the form of demand/term loans or a reducible or non reducible overdraft facility.
- In the case of a reducible overdraft facility the drawing power of the applicant is reduced every month in order to ensure 100% repayment of the loan at the end of the repayment period.
- These loans are extended to all people engaged in trade, commerce and business, individuals whether salaried or self employed, business professionals with a high net worth, proprietorship firms, partnership firms, a pvt.ltd. co. or a public ltd Co, HUF’s, societies, staff members and even Non Resident Indians (guided by the RBI guidelines).
- These loans cannot be availed by NBFC, Trust and partnership firms with HUF as one of its partners.
- The loan amount to be sanctioned is decided on the basis of borrower’s repayment capacity and the city where the loan is being disbursed. However, the loan amount ranges from Rs. 10,000- Rs. 10 lakh.
- The bank requires an equitable/legal mortgage charge of the property as primary collateral. However, the bank may also demand for a third party guarantee at its sole discretion.
- The property in question should be fully insured against damages due to fire, natural calamities, communal riots and other such related matters during the period of the loan advance.
- The individual in order to apply loan must clear the entry norms as set by the bank.
The amount of BOI Property loan to be sanctioned depends upon the mortgage value of the security, margin requirements, the net home take away pay and repayment capacity of the applicant. It also depends upon the type of loan applied for and the business profile of the applicant.
- In case of loans to individuals (salaried or non salaried) / self employed professionals: For applicants falling under this category, the bank extends loans amounting to 48 times of average net take home salary as per his salary slip/Form 16/last IT return, or 4 times of the individuals net annual income along with other income sources such as rental from one’s property based on IT returns for the last 2 or 3 years.
- In case of loans to doctors/joint account with all the holders being doctors: The amount of loan to be sanctioned amounts to 4 times of the average net annual income of last 2-3 years based on IT returns for the last 2 or 3 financial years.
- In case of loans to proprietorship firms/partnership firms/companies: The amount of loan depends upon the nature of loan applied for.
- For Reducible overdraft facility: The amount of loan to be sanctioned amounts to 4 times of the average net annual income of last 2-3 years based on IT returns for the last 2 or 3 financial years.
- For non reducible overdraft facility: The amount of loan to be sanctioned amounts to 20% of the annual turnover based on the audited balance sheet for the last year or the audited balance sheet for the last two to three years, subject to the tenure of the business’s existence.
To become eligible for a loan against property, the bank generally demands proof of address, identity proof, latest bank statement where you can show a salary / income for the past 6 months, salary slip if employed and relevant copies related to the property which the borrower wants to pledge for the loan. If the borrower is self employed then generally the certified financial statement for the last 3 years is needed.
Eligible customers for loan against property from Bank of India are those engaged in commerce, business, trade, professionals, self-employed, individuals, with high net worth, propriety firm, salaried individual, partnership firms, companies (public/private), HUFs (excluding partnership firm where HUF is a partner), staff members, societies and NRIs, subject to compliance with the bank’s and RBI guidelines.
Eligibility of loan against property scheme as usual for loans depends upon the borrower’s credit rating along with other factors like age, qualification, number of dependents, partner’s name, liabilities, assets and continuity of his / her profession. Once the applicant fulfils all the eligibility criteria and produces all the relevant documents the loan is sanctioned to him / her. Once the loan from BOI is approved, it is either disbursed in instalments or in full as asked by the borrower. Generally, the borrower is given an option to choose from fixed and floating interest rates and Bank of India like most of the other banks provides an option of part and full prepayment of the loan.
Loan liability and interest rate are issued under floating rate method and the interest rate is linked to the existing MCLR on a monthly basis. There is a pre-decided MCLR to which all the interest rates are linked. The banks do not offer loans at interest rates lower than the MCLR. The changing trends of the market rate have an effect on MCLR of the bank. In case of a sudden increase in the market rate, the MCLR goes up, thereby, increasing the existing interest rates on all the loans issued by the bank. However, in case of a sudden fall in the market rate, even though the MCLR goes down, the bank cannot decrease its interest rates on all the loans issued beneath the permissible MCLR. The current MCLR of the bank is 9.30%
The bank charges an interest of 11.50% for all the loans that it issues under the reducible overdraft loan type facility.
The bank charges an interest of 12% for all the loans that it issues under the non-reducible overdraft loan type facility.
The bank levies certain kinds of fees and charges. The list of these charges is given below:
- Processing charges: These charges vary depending upon the nature of the loan.
For normal loans: The bank charges a onetime processing fee standing at the rate of 1% of the sanctioned loan amount, subject to a minimum of Rs. 5,000 and a maximum of Rs. 50,000.
For property loan from BOI under non-reducible overdraft facility: The bank charges an annual fee standing at the rate of 0.50% of the sanctioned/reviewed loan amount, subject to a minimum of Rs. 5,000 and a maximum of Rs. 30,000.
For loans under non reducible overdraft facility: The bank charges an initial fee standing at the rate of 0.50% of the sanctioned/reviewed loan amount, subject to a minimum of Rs. 5,000 and a maximum of Rs. 30,000 for the first year, and a processing fee @ 0.25% of the reviewed loan limit for the years thereafter.
However, for loans applied by the applicants residing in rural areas, the processing fee is charged at the rate of 75% of the above mentioned processing charges.
- Equitable Mortgage Fee: This fee depends upon the amount of the loan availed. For loans up to Rs. 10 lakh, an equitable mortgage fee of Rs. 5,000 is charged. For loans lying between Rs. 10 lakh to Rs. 1 crore, this fee stands at Rs. 10,000. For loans lying between Rs. 1 crore to Rs. 5 crore, an equitable mortgage fee of Rs. 20,000 is charged.
- Penal Charges: The applicant must make sure that the EMI’s are paid well on time; otherwise the bank levies a overdue fee of 2% on the EMI, calculated from the period of due date to the actual date of payment.
- Appropriate documents have to be submitted by the applicant regarding the purpose of mortgage loan
- The facility of loan against property is not extended for speculative purpose including investing in equities
- The facility of property loan from BOI is not given to developers, builders, promoters, and / or real estate agents for real estate activities such as purchase of land, construction of a building with intent to sell or holding real estate stock for sale or resale purpose.
The repayment tenure depends upon two most important factors i.e. the maximum age of the applicant and the nature of loan.
- Age: The maximum repayment period depends on the retirement age of the applicant at the time of maturity of the loan i.e. the repayment tenure added to the applicant’s age should not cross the retirement age of the applicant at the time of maturity of the loan.
A non salaried professional can apply for repayment period to a maximum of 70 years of his age. This is applicable in the case of non salaried professionals/self employed or proprietorship concerns.
A salaried professional with a confirmed permanent service can apply for a repayment period to a maximum of 60 years of his age.
Bank of India property loan also gives you the option to make payments in monthly instalments so as to reduce your burden. The EMI on property loan is calculated using a special device loan against property EMI calculator.
Nature of Loans from Bank OF India:
For normal loans: The repayment of the BOI property loan has to be done within a maximum period of 12 years by ways of equated monthly instalments on a regular basis i.e. the entire BOI property loan can be paid off through 144 equal instalments payable every month.
For loans under reducible overdraft facility: The repayment of the loan has to be done within a maximum period of 12 years by ways of equated monthly instalments on a regular basis.
For loans under non reducible overdraft facility: The interest on the borrowed amount has to be paid on a monthly basis.
Margin requirements: The minimum margin requirement on the value of the property for calculation of the maximum loan amount depends upon the market value, distress sale value and the registration value of the property or of a similar property on the specified valuation date. The lowest of the three will be considered.
- No margin is required for loans provided on the basis of circle rate/ registration value of the property.
- A minimum margin standing at the rate of 60% on the market value is required.
- A minimum margin of 50% on the distress sale value is required when opting for loan against property.
Net pay of the applicants: The amount of the loan to be sanctioned also depends upon the net home take away pay and the business profile of the individual.
In Case of loans to individuals (salaried or non salaried)/self employed professionals/: For applicants drawing a gross monthly income (GMI) of Rs. 1 lakh and below, the net take home pay (NTHP) should at least amount to 40% of his GMI. The NTHP for individuals drawing a GMI ranging from Rs. 1 lakh to Rs. 5 lakh, should stand at a minimum of 30% of the GMI, and for an applicant with a GMI of Rs. 5 lakh and above, the NTHP should stand at a minimum rate of 25% of the GMI.
In case of proprietorship firms/partnership firms/companies applying for a loan under reducible or non reducible overdraft facility a minimum DSCR of 1.5 is required.
List of papers / documents applicable to all Resident individual applicants for availing property loan from BOI are:
- Completed loan application with all the details required
- 2 passport size photographs (including those affixed in loan application)
- Proof of identity: Electoral ID Card / Passport / Driving License / PAN Card
- Proof of residence: Electoral ID Card / Passport / Electricity Bill / Telephone Bill
- Non- salaried borrowers need to give proof of business address
- Statement of bank account for the last six months
- Previous bankers’ signature identification documentation
- Personal Assets and Liabilities Statements in Bank’s standard format.
- Brief write up of securities charged in respect of other loans availed from the bank /other banks/ housing and / or auto finance companies /other sources.
To keep up with the rising trend of online transactions, the bank offers the facility to apply for its Loan against property online. The process is really simple and convenient for applying online. You can either visit the bank’s website or log on to www.paisabazaar.com. The bank’s executive will get in touch with the customer and guide him through the loan application process. So, the customer does not have to engage in useless hassles to avail a loan. He or she simply needs to log in to the website, choose the relevant tab, fill up the required details and supply the necessary information.
Applying Through Branch
An applicant may visit the nearest branch of the Bank of India, obtain an application form for Loan against Property, fill up the form and submit it with the relevant documents to apply for the loan. Once the application process is complete, and all the necessary formalities are done, the bank will grant the loan to the applicant.
Applying Through Phone
Alternatively, a new customer can also visit the bank’s website and use the bank’s helpline number to connect with the bank. The bank’s representatives are always active and ready to provide you with the necessary assistance with everything related to taking a property loan from BOI or with any other queries or grievances.