Loan Against Property FAQs
Q1. What can Loan against Property be used for?
Any loan against a residential or commercial property can be used for both personal and business purposes. In fact, you can use it for anything other than speculative or non-prohibitive activities.
Q2. How does the lending bank decide on the amount I can get as loan against property?
Basically, the bank looks at your repayment capacity. For calculating the loan amount, your income, age, qualifications, number of dependants, spouse’s income, assets, liabilities, stability and continuity of occupation and savings history are taken into consideration. However the eligibility of loan does not, generally, exceed 60 percent of the market value of the property.
Q3. Can there be a co-applicant for loan against property? If yes, who can be co-applicant?
You can include your spuse as a co-applicant and that results in a higher amount being lent. However, if the property is co-owned, all co-owners mandatorily need to be co-applicants.
Q4. What are the processing fees for such a loan?
Processing fee for loan against any property varies from bank to bank and is generally around 1 percent.
Q5. How is the rate of interest on loan against property calculated?
Interest is calculated on daily reducing balance. Your monthly out-go (equated monthly installment – EMI) is much lower as compared to the interest on annual reducing balance.
Q6. What is the tenure of the loan?
Loans against property has a maximum tenure of 15 years, subject to the condition it does not exceed your retirement age. This condition however can be flexible in certain cases
Q7. How to repay my loan?
You repay the loan in Equated Monthly Installments (EMIs) comprising principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement.
Q8. What security will I have to provide?
As the name implies you need to mortgage your property for availing this loan. This mortgage is Equitable mortgage by Memorandum of Entry by way of deposit of title deeds and/or such other collateral security, as may be necessary. Collateral security for by way of assignment of insurance policy or any such other assignable financial instruments are also required, as security to loan if deem necessary by the Bank.
Please do ensure that the title to the property is clear, marketable and free from encumbrance. To elaborate, there should not be any existing mortgage, loan or litigation which is likely to affect the title to the property adversely.
Q9. Can I repay the loan ahead of schedule?
Yes. Prepayment is possible and there is no prepayment fee if you repay the loan after six months of availing the loan if you pay from your own source of funds without transferring the loan.
Q10. How is my loan reassessed if there is a change in status from Non-Resident Indian to Resident Indian?
The repayment capacity of the applicant(s) based on Resident status is reassessed and a revised repayment schedule worked out. The new rate of interest will be as per the currently applicable rate of Resident Indian loans (for that specific loan product). This revised rate of interest would be applicable on the outstanding balance being converted. A letter is given to the customer confirming the change of status.