5 Ways Your Property Can Help You in Accomplishing Your Goals

What do you usually do when you have additional funds at your disposal? The usual tendency is to acquire immoveable asset as property. This investment can also help you in times of need as you can mortgage your assets and avail Loan Against Property. As you Apply for Loan Against Property, banks need assurance that you will pay it back. Banks treat the assets you mortgage to them as collateral. Unfortunately, if you are unable to repay the loan, banks have the right to sell the property and recover its loan. Let us look at 5 ways your property can help you in accomplishing your goals.

Overdraft Against Property

Your vacant property can help you in times of emergency by allowing you to mobilise funds from banks or NBFCs (Non-Banking Financial Companies). Banks have different products such as ‘Overdraft Against Property’ where it lets you borrow up to 50% to 65% of the market value of the property depending on your income and repaying capacity. The rate of interest on such facilities is around 12% to 14%. You get a ceiling up to which you can use the funds. It is a revolving account that enables you to repay and reuse the funds as you like, however within the sanctioned limit. The benefit of this facility is that you pay interest only for the amount you utilise. The banks do not seek details about the end use of the funds, but you should not use it for speculative purposes. These funds are handy to cater for urgent expenses such as marriage, higher education, medical treatment, and so on.

Top-Up Home Loan

In case you have a Home Loan and need money urgently, you can avail the Top-Up Home Loan facility provided the property has the value to cover both your existing Home Loan and the proposed top-up loan. The facility is handy for carrying out urgent repairs to your current house. The top-up loans are cheaper than the ‘Overdraft Against Property’ or the ‘Home Equity loans.’ The advantage of these top-up loans is that you can extend the tenure of the loan to coincide with the existing Home Loan repayment tenure. Different banks have different rates of interest. However, the rates are more than the housing loan interest rates.

Loan Against Property

The value of your home investment appreciates over a period. Hence, you can use this fact to your advantage by availing a Loan Against Property or Home Equity Loan. This loan facility is similar to the Overdraft Against Property, however, you can avail a maximum of 90% of the market value of the property in case of Loan Against Property. The difference is that you get this loan as a lump sum amount instead of a limit. Hence, you pay a higher proportion of interest as compared to the overdraft facility. However, the advantage is that you will repay the loan entirely over the specified tenure and release your asset. This facility is a reducing-balance facility where you do not have the liberty to reuse the money that you have repaid to the bank. Other than the market value of the property, your income and repaying capacity play a prominent role in deciding the quantum of finance.

Advance Against Rent Receivable

The three loans discussed above are either against self-occupied or vacant properties. In case you have let out your property to a PSU (public sector undertaking) or a corporate company and receive regular rent from them, you can avail loan against rent receivables. Banks have loan products that enable it to sanction loan up to 50% to 85% of the future rent receivables subject to the value of the property. The rates of interest on such loans are usually in the range of 11.5% to 14%. It is an excellent way to raise finance to carry out urgent repairs and renovation to the property.

Reverse Mortgage

Senior citizens can avail the facility of reverse mortgage where the banks sanction up to 50% to 60% of the value of the property to enable the senior citizens to lead a respectable life. The product is such that the banks disburse the loan amount in the form of monthly instalments. There is the scope of taking a lump sum payment as well to meet urgent requirements like higher education of children, medical treatment, or marriage, and so on.

However, the regular disbursement is on a monthly basis. This facility is available to either of the partners with the tenure of payments extending up to the lifetime of the last surviving partner. Subsequently, the legal heirs can repay the loan and claim the property. They can also avail a loan against the same property to repay the reverse mortgage loan. The banks can also sell the property to recover the amount they have lent. The borrowers or the legal heirs can sell the house at any time to adjust the reverse mortgage loan. Your existing property (self-occupied, vacant, or let out) can fetch you access to funds in an emergency. It is advisable to weigh all the options properly before availing these facilities.

Also Read: Types of Property Against Which You Can Obtain a Loan