Loan against Property

Loan against Property refers to the secured loan category like home loan where the borrower gives a guarantee by using his property as a security. The right of ownership of the property is still with the borrower, and if he/she is unable to repay the loan amount, he/she can sell the property to pay off the debts.

Loan against PropertyTypically these loans are used to start or expand business or to renovate your house. But it can also be used to repay existing high rate loans.

  • The maximum loan amount varies from bank to bank. It could range from Rs.2 lacs up to Rs.100 lacs. The exact amount depends on your property valuation, income and of course repayment capacity.
  • The rate of interest is usually 6.5%+, but depending on one's profile and the Bank's criteria, it may vary.
  • The maximum loan amount can come upto 50% of property value for commercial setups and up to 60% for residential properties.
  • The maximum loan tenure is 15 years.
  • You require security, collateral or guarantors for obtaining a Loan Against Property.
  • Most banks do not accept properties that are on lease or that are based on power of attorney.
  • The maximum age limit of eligibility is 60 years.
  • You can choose either Fixed or Floating rate of interest. You also have an option of changing from Fixed to Floating interest rates and vice versa once every year.
  • A processing fee is usually 0.05% to 3% of the loan amount and is payable upfront. This fee however will be deducted from the disbursal amount payable to you. You should always ask for the 0% processing fee or negotiate the processing fees.
  • You pay your loan in EMIs through post-dated cheques or through ECS to debit your Bank account through ECS with the EMI amount.
  • You can also prepay the entire loan outstanding anytime after 180 days of availing the loan. Pre-payment charges will be levied accordingly. If you intend to do so, please ask for the pre-payment amount to be waived or a reduction in the penalty charges.
  • You can also increase or enhance your loan loan against property eligibility. For that you need to show income of atleast three persons, most preferably a family member or a business partner.

Factors determine the eligibility of a mortgage loan.

loan against property

The general factors taken into account while determining the eligibility of loan against property are listed below:

  • Income
  • Age (Min. 21 Years)
  • Property Valuation
  • Existing Liabilities (if any)
  • Current Work Experience
  • Financial Documents
  • Number of Dependants

How much I can get?

The eligibility of Loan against Property is calculated on the basis of either the percentage of property value that you own and how much income you have that you can return the emi with.So you can get Loan against property upto annex % of property value and the net amount that you earn after other emi a percentage of that amount can go into the emi.

Loan against Property is given on below mentioned properties and the % that you can get loan is listed below.
Residential Property Commercial Property
  • Self Occupied – 65%
  • Vacant - 55%
  • Rented - 55%
  • Self Occupied – 50%
  • Vacant - 40%
  • Rented - 40%
This varies from Bank to Bank in 5- 10% of above. To calculate how much you can pay its looked by most banks in the below mentioned ways
For Salaried For Self-Employed
  • {(NTH - Obligation) * 60%} / EMI per Lac
  • {(NTH - Obligation) * 65%} / EMI per Lac
Whichever is lower from the value of the property or your income- that loan amount will be given to you.
The other criteria are-Max. Age For Salaried – 60 Years & For Self-Employed – 70 Years

Features at Glance

  • Loans from Rs2 Lakh onwards depending on your needs
  • Borrow up to 70% of market value of the property
  • Flexibility to choose between an EMI based loan or an overdraft
  • High tenure loans for ease of repayment.
  • Attractive interest rates.
  • Simple and speedy processing.
  • Loan for salaried & self-employed individuals
  • Advantages of taking a Loan Against Property
  • Cheaper than Personal Loans: It works out to be much cheaper than a personal loans, which is usually issued at interest rates in the region of 16 per cent-21 per cent.
  • Longer Loan Tenure: The tenure for a Loan Against Property is usually longer than that for a personal loan. Generally, LAP is given for a maximum tenure of 10 years.
  • Lower EMI: Since the rate of interest is lower, many times, LAP Equated Monthly Installments (EMI) turn out to be cheaper than those under personal loans.
  • Simple documentation and Fast Approvals: LAP being a secured Loan has comparatively faster approvals and minimal documentation.

Loan Against Property can be taken for following purposes

  • Expanding your business
  • Get your child married
  • Send your child for higher studies
  • Fund your dream vacation
  • Fund Medical Treatments

In nutshell, Loan Against Property is a secured multi-purpose loan with larger tenor and lesser rate of interest.

Documents required for applying for a loan against property.

For Salaried:

  • Application form with photograph
  • Identity and Address Proof
  • Latest Salary Slips
  • Form 16
  • Bank Statements (Last 6 months)
  • Processing fee cheque

For Self-Employed

  • Application form with photograph
  • Identity and Address Proof
  • Proof of business existence & Education Qualifications.
  • Last 3 years ITR
  • Last 3 years P&L and Balance Sheet
  • Bank Statements (Last 6 months)
  • Processing fee cheque

Stages involved in availing the loan.

  • Application
  • Processing
  • Documentation
  • Verification/Valuation
  • Sanctioning of the Loan
  • Disbursement

Important announcement are goes here