Monday, October 29, 2018

6 points you should not avoid while applying for Loan Against Property

Loan Against Property (LAP) is the loan that you avail by keeping your property as a mortgage with the bank. The loan can be availed against any residential/ commercial/ industrial property. However, before applying for such loans, you must keep a few things in mind to avoid any confusion and to make an informed decision.

We have listed a few points that you should not avoid while taking a loan against property which is as follows:

1. The property value: Before opting for a loan against property, it’s important to compare the loan to value (LTV) ratio offered by different banks and financial institutions. The loan is given as a certain percentage of the market value of the property. Generally, banks lend up to 50% to 60% of the value of the property. In case your loan requirement is higher than the property’s cost, then other financing options have to be considered in combination.

2. Interest rate: Another important thing that you should keep in mind is the interest rate offered on the loan. It’s better to compare the interest rates offered by different banks before taking the plunge. Comparing several options will enable you to get the best deal for yourself. You can compare and apply through fintech lenders to zero in on the best loan offers across multiple banks without compromising your credit score. The interest rates offered by banks are usually in the range of 8.75% to 12%.

3. Income and repayment ability: Always borrow as per your income and repayment ability. You must have a regular source of income in order to avail the loan against property. If the loan amount that you apply for is higher than your eligibility, it can lead to rejection of your loan application. Further, having high monthly installments can eat a major portion of your income and you might have to compromise on some important financial goals like your retirement plan, child’s education, etc. So, always choose the loan amount that you can comfortably repay in future.

4. Co-applicant for a mortgage loan: If you feel that you would not be able to repay the loan amount before the due date, you can apply for the loan with a co-applicant. Your co-applicant can be your parents, spouse or children. The lenders will run a check on the co-applicant to check whether you and your co-applicant together can repay the mortgage loan amount or not.

5. Real estate ownership: If you are the sole owner of the property, then there must be no problem in availing the loan against it. However, if there are co-owners but they are not agreeing with your decision of applying for LAP, or the property is disputable, then the mortgage loan can be rejected.

6. Know the charges involved: Apart from the interest rates, there could be other charges such as pre-closure charges, loan processing fee, sales tax, agent cost and more. You must be aware of all these charges or fees that you need to pay in order to avoid any confusion while applying for a loan against property.

So, if you are in urgent need of money, you always have the option to opt for a mortgage loan. Just follow the above-mentioned tips to crack the best deal and reduce your overall debt burden.