SBI Loan Against Property: 10 Things to Know
The State Bank of India (SBI) is the largest banking company in India. It has access to and caters to a very large chunk of the population of the country. SBI has the widest range of product offerings among all other financial services companies in India. Lending has been one of the core businesses of SBI through which they continue to make the largest chunk of their revenue. They have a widely successful Loan Against Property offering.
Here is a list of 10 very important things to know if you are interested in getting SBI Loan Against Property.
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1. Income eligibility conditions:
Income eligibility conditions are set by any lender to decide how much minimum income a borrower should be earning to qualify for availing of a loan. As the income of the borrower goes up, so does their loan eligibility. So a person who is just starting their career will have a low income and thus low eligibility, as you progress in your career, you become eligible to borrow more. SBI Loan Against Property Eligibility is open to both self-employed and salaried individuals at Rs 25,000 minimum. The borrower can also club income of spouse or family member if they want a joint loan, subject to property ownership conditions.
2. EMI to NMI ratio:
EMI to NMI ratio is the percentage of your Net Monthly Income to what will be the EMI on the amount that the bank will lend. The bank does not expect you to pay all your income to them as EMI (Equated monthly Instalment). You will also have to take care of your living expenses and other savings as well. Besides, in many cases, the income of borrower can fluctuate on either side, and banks need to account for borrower’s income going down in the future. At SBI, people earning between 3 to 5 Lakhs per annum have EMI to NMI ratio of 50%. Annual income between Rs 5 Lakh to Rs 10 Lakh can help you avail a loan for EMI/NMI ratio of 55%, and annual income above Rs 10 Lakh can get you the EMI to NMI ratio of 60%. Simply put, anyone earning over 1 lakh per month can have an EMI of up to Rs 60,000.
3. Security towards loan:
Security towards the loan is the property that you will pledge to the bank as collateral. The bank keeps it as a safety consideration that borrower will return the loan amount, or else the bank will be authorised to liquidate the property and make good on their dues. Unlike some other banks which will only keep the residential property as the security towards the loan, SBI allows you to keep both residential and commercial properties as a pledge. The final decision on eligibility for SBI Loan Against Property is made by the loan granting officer or branch manager.
4. Loan to Value ratio:
The loan to value ratio is the percentage of the value of your property that the bank will lend out to you. Banks will never lend out LAP to the full property value simply because the property value fluctuates. They must account for standardised fluctuation in property prices. For loan amounts up to Rs 1 crore, SBI Loan Against Property is granted for up to 65% of the property value, i.e., Rs 65 Lakh. For property valued above Rs 1 crore, SBI will only lend up to 60% of property value. This is still subject to other considerations like borrower’s age and income etc.
5. Loan amount range:
The range of loan amount is the minimum and maximum amount between which you can borrow. This regulation works in accordance to the loan-to-value ratio and restricts how much the bank will lend to a borrower even if the property is valued extremely high. SBI sets up the minimum loan amount of Rs 10 Lakh and a maximum of Rs 7.5 crore. For non-BPR areas, the maximum loan amount is restricted to Rs 1 crore only. For BPR areas, if the property is located within the Municipal Corporation areas of Delhi NCR, Mumbai, Pune, Chennai, Ahmedabad, Bangalore and Hyderabad centres, the limit is Rs. 5 crore, and for all other BPR areas, the maximum limit is 2 crore.
6. Purpose of loan:
The purpose of the loan is the reason for which you will be borrowing the money from the bank. Most of the banks will lend you money for personal or business purpose. With SBI, the condition is slightly different. SBI does not provide LAP for speculative purposes. Nor do they provide loans for business purposes. They only lend for personal purposes, for example, like covering the expenses of education, marriage, healthcare, etc. SBI requires the borrowers to submit an undertaking about the end purpose of the loan, though they do not ask for any proof of end-use of money.
7. Rate of Interest:
SBI Loan Against Property Interest Rates are easily among the best in the entire market. Their interest rates tend to differ based upon the income mode of the borrower.
•If the borrower is considering more than 50% of Net Monthly Income as a salaried income, the interest rate for loans up to 1 crore is 1 year MCLR + 1.45%, for loans between 1 to 2 crores it is 1 year MCLR + 2.10% and loans above 2 crores it is 1 year MCLR + 2.5%.
•If the borrower is considering more than 50% of Net Monthly Income as a business, professional or rental income the interest rate for loans up to 1 crore is 1 year MCLR + 2.1%, for loans between 1 to 2 crores it is 1 year MCLR + 2.60% and loans above 2 crores it is 1 year MCLR + 3%.
8. Processing charges:
Processing charge is the cost that the bank incurs to process your application. This may include, but is not limited to, legal costs, agreement related costs, credit report related costs, property valuation costs and charges, and taxes to be paid to municipal and state governments about conducting property-related due diligence like title deed review, ownership chain review, etc. This is one factor where SBI Loan Against Property beats every other competitor. While other lenders have a percentage based minimum ceiling of processing fees, SBI has a maximum ceiling. They will charge you 1% of the loan amount subject to a maximum of Rs 50,000 along with all applicable taxes.
9. Borrower’s age-related rules:
Considering the special nature of Loan Against Property, the approval depends upon the age of the borrower. All loans under LAP offering must compulsorily end before the borrower (the eldest borrower, if taken jointly) reaches the age of 70 years. Thus, all other conditions being met, the age eligibility for SBI Loan Against Property is around 64 to 65 years.
10. Loan tenure:
The loan against property is offered for a minimum of 5 years and a maximum of 15 years by almost all banks in India, and the same is the case with SBI. This is, of course, limited by the borrower’s own age as discussed above.
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