Loan Against Property
Got that business idea you need funding for? Do you need to invest in your business expansion? Do you just need relatively cheap funds for any purpose? If you have a loan-free property then probably a Loan Against Property is the answer for you.

Popularly known as LAP, these loans are a convenient means to access funds at interest rates lower than personal loans or other forms of unsecured loans.

To avail such loans, you offer an existing property as a security or collateral against which the lender gives you a loan. The current market value of the property determines how much loan you can avail against the property. Such loans allow the owners of properties to leverage the value of their existing properties to raise funds for a variety of reasons. The lender will also check for repayment ability of the loan being availed.
  • Residential property - plot or built up
  • Commercial property - like office, shop, hotel, hospital, education institution etc.
  • Industrial property - plot or built up
  • Warehouse
Most institutions lend between 60%-75% of the value of the property as a Loan Against Property, provided the borrower can demonstrate the ability to pay the installment for such a loan. Few institutions even go up to 90%, for select borrowers / properties.
Your eligibility is determined after looking at the following:
  • The current market value of your property and its current status
  • Your current Income
  • The nature and continuity of your employment
  • Your current obligations i.e. the installments (EMI’s) you are currently paying, your credit card balance, other credit limits availed
  • Your credit history
  • The end-use/purpose of availing such loans is also discussed with the lender and may have a bearing on the loan sanction
In order to give the lender an accurate picture of your loan servicing capability as a family, you could choose to have one of your family members as a co-applicant to your loan. Other members of ones immediate family may also become co-applicants to a Loan Against Property viz. spouses, parents, children& siblings. Where income from a partnership or company is considered, the partners / directors can also become co-applicants, if the policy of the lender allows. In case of multiple property owners, all co-owners necessarily need to come on the loan as co-applicants.
  • Identify the property you intend to offer as security
  • Determine your Loan Eligibility - This differs from lender to lender and depends on various factors like your age, income, profile, past credit performance etc. Just contact mymoneymantra and our Mortgage Loan Specialist will help you check your eligibility across lenders. We will also help you get the best deal.
  • Apply for the Loan with the lender of your choice by filling the application form of the lender and provide all requisite documents. Our team will meet you at your convenience and help you choose the lender best suited for your requirements, completing all documentation requirements and getting your application logged in with the lender. All this at NO COST to you as our partner banks pay us for our efforts in this regard.
  • Verification/Credit Appraisal Process - The lender will verify the information and documentation provided along with checking your credit history. The lender can also ask for additional documents.
  • Legal Document Checking - The lender will do a title search of the property to ensure that the current ownership is valid.This is done either through an in-house legal department or an external legal firm.
  • Property Valuation - The lender also gets an in-house or independent valuation for the property to determine the loan amount. For large loans, some lenders get 2 valuations done for the same property and could determine the loan amount basis the lower valuation. The valuer will also check if the building meets the approved building norms. The upkeep of the property is an important factor considered by the valuer and lender. Similarly, the future expected life of the building is normally required to exceed the tenure of the loan sanctioned.
  • Personal Discussion - The lender will normally meet or speak to the borrower during the loan appraisal process. Some of the aspects that come up during such discussions are :
    1. Details of the property
    2. Income details including latest year financial trend
    3. Business / job aspects
    4. Other investments, savings, repayment capability
    5. End-use/Purpose of taking the loan
  • Loan Offer letter - Post verification and credit appraisal process, the lender sends an offer letter with details like loan amount, tenure, rate of interest and other terms and conditions.
  • Accept the terms and conditions of the Sanction Letter before proceeding to the next step.
  • Sign the Loan Agreement and provide repayment instructions. Submit the entire chain of original property papers to the bank for mortgage.
  • Disbursal of Loan Our Mortgage specialist will assist you all the way. No need to worry, as we are just a phone call away at all times. We will be happy to hear from you even after the loan has been disbursed, if you would like any help or clarification regarding your loan.
Availing a Loan Against Property is an important decision, given that this is a long term commitment and you are offering a valuable property as collateral. So take a moment to consider all possible options and scenarios before choosing your loan and your loan provider.

Use the following mantras and hopefully you will not make any regrettable decisions!

  • Cheapest isn’t always the best. Do not just go by who is offering the lowest interest rates. The cheapest may not be the best bet for you.
  • Compare. Check your loan eligibility across multiple institutions and see who is offering you the maximum funds, lowest rates, better pre-payment options, longer tenure, minimum documentation, better product structure etc.
  • To fix or to float? Choose the type of interest rate you are going for with caution. Whether to go with a fixed rate or floating rate deal is a decision you need to base on the current market dynamics around interest rates as well as what you expect to happen over the next few years. Our Mortgage Loan specialists will be happy to advice you in this regard.
  • Assess all costs. The application costs such as application fee, legal fee, title search report charges, valuation cost, processing fee, loan agreement stamping charges etc. vary by lender. These are significant expenses and add to the overall cost of the loan. So do not just go by just interest rates. There may be some such expenses which you need to be aware of. We will be happy to guide you all the way.
  • Know your exit options clearly. Learn about the pre-payment process. On Loans Against Property, the regulators have made partial and full pre-payments free of cost for individual borrowers. This is a great help to you, as you can cut your interest cost by making additional repayment as and when you have surplus funds available. However for other borrowers like partnerships and companies, a pre-payment change of 2%-5% is normally applicable. There could also be restrictions laid down on when and how much pre-payment can be done in a year. In the event you find a better deal that you want to switch to or you simply want to pay off your loan early, this penalty can make the decision an expensive one.
  • Service before sales. Evaluate the service performance of the lender you are going with. Cheap loans do not always mean good service.
  • Safety first. Especially in products like loans against property where a security is given to the lender, do ask sufficient questions about the nature and process of storing or retrieving your security documents.  Make sure you obtain and keep a copy of the list of documents held by the bank.
a. Commercial Property loans are meant to purchase commercial properties much like Home loans are meant to purchase residential properties.Whether it is buying space for your first office or for subsequent branches or simply to invest in commercial real estate for generating rental income, Commercial Property loans are the answer.

Like Home loans and other property based loans the consumer borrows money from a Bank, NBFC or a Housing Finance Company, to purchase a commercial property and offers the same property to the lender as a security.

b. Commercial Property Loans may be availed for:
  1. Purchasing a property within a commercial development which is currently under-construction
  2. Purchasing a ready commercial property from its builder or its current owner
  3. Purchasing a commercial plot - in a private development or from a current owner or from a government development authority
  4. Financing the construction of commercial use building on a plot you already own
  5. Purchasing a commercial plot as well as financing the construction of your commercial property on it.
c. Most institutions lend 50% - 70% of the value of the property as a Commercial loan, provided the borrower can demonstrate the ability to pay the installment for such a loan.

d. You may apply for a commercial property loan after you have decided which property you are acquiring, However, even if you haven't made a decision on the property, you can still apply and your financier would be able to let you know what loan amount you are eligible for under their Commercial Property loan program.

e. Your Commercial Property loan eligibility is determined after looking at the following:
  • Your current audited income and financial trend for the latest year
  • The nature and continuity of your employment/business
  • Your credit/loan repayment history
  • Your current obligations i.e. the installments (EMI’s) you are currently paying, your credit card balance, other credit limits availed
  • The lending bank or institution will also consider which property you are buying. In the event it is a property under construction by a developer, the credibility of the developer and past performance on their projects will also determine how much the lender is willing to lend against such a property.
This product is tailored for people who have significant rental income.Under Lease rental discounting, the borrower avails a loan by assigning future rental income to the lender. The property from which the rent is accruing, is also offered as security for the loan.

Most institutions discount upto 90% of the value of the remaining lease rent, provided the borrower can demonstrate the ability to pay the installment for such a loan.The tenure or duration of such loans is much shorter than other property based loans and usually linked to the amount of time remaining for the lease on the property to expire.

Your eligibility is determined after looking at the following:
  • Your current rental income
  • Terms of the lease agreement i.e. when was the lease signed, what is the balance tenure of the lease, what are the key terms etc.
  • Your current obligations i.e. the other Installments (EMIs) you are currently paying
  • Your credit/loan repayment history
Some institutions have special schemes where they extend the loan tenor beyond the lease period. Our Mortgage Loan Specialist will help you get the highest loan amount at the best possible interest rate. Contact us today!