What is Loan Against Property? Everything You should Know About

What is Loan Against Property? Everything You should Know About

Business expansion, buying a new house, funding your child’s education, planning a dream wedding, or unexpected medical expenses; how about unlocking the value of your property to meet expenses? Let’s understand what is a loan against property and the key requirements to seek one.

Loan Against Property Meaning

Loan against property meaning is all explained in its name! A loan against property is an advance taken from a bank or NBFC against a pre-owned property. It is a secured loan wherein a residential or commercial property can be mortgaged to avail the loan against the property. The loan comes without an end-use clause and the loan proceeds can be used to fund any business or personal requirement. The property in question remains mortgaged with the lender till the loan is fully repaid. Thereafter, the ownership rights are transferred back to the borrower.

Benefits of Loan Against Property (LAP)

LAP is the best way to unlock the value of a property. The many benefits that loan against property offers are:

Continue to enjoy ownership rights - The owner of the property can avail of the loan without selling off the property. The property remains mortgaged with the lender till the loan is repaid. 

No end-use clause – The loan proceeds of a loan against property can be used to fund any kind of financial shortfall. 

Low rate of Interest – As a loan against property is a secured loan, the rate of interest at which it is available is lower than unsecured loans. 

High principal amount – The principal amount that is approved for a loan against a property is directly linked to the market value of the property. 

Long repayment term – The repayment term of the loan can go up to 20 years. This makes repayment of loan amount easy and comfortable.

Flexible repayment options – The loan against property can be repaid through easy EMIs. The options to part pre-payment and foreclose the loan are also available. 

All properties accepted – In addition to fully built-up residential and commercial properties, a loan against property can also be sought against a piece of land.

How Does Loan Against Property Work?

The process to avail of a loan against a property is simple and hassle-free. The process involves:

• Choose the lender
• The property in question must meet the property specifications set by the lender. Also, the property must be registered in the name of the borrower and should have a clear title.
• Through the documentation process, the lending company will verify the property and ownership details.
• The lending company will evaluate the market value of the property.
• Up to 70% of the market value of the property can be sought as a loan.
• A loan against property agreement will be signed between the lender and borrower. The loan agreement will mention details about the repayment term, rate of interest, EMI details, etc.
• The property will remain mortgaged with the lender till the loan is repaid in full.
• Once the loan is fully repaid, the mortgage agreement stands null and void and the ownership rights are transferred back.

Best Loan Against Property Interest Rates 2021

How to Get Loan Against Property in India?

The process to get a loan against a property starts with finding a suitable lender. The borrower must clearly understand what is loan against property, the terms and conditions offered by each lender, and the rate of interest at which the loan can be availed. The loan Against property calculator can help your borrower know the principal amount of the loan against the property they are eligible for. After careful comparison between the lenders, the process to get a loan against property includes: 

• Fill out the loan application form
• Customer verification process
• Submission of necessary documents
• Property evaluation and verification
• Loan approval and sanction

 Eligibility Criteria For Loan Against Property

The eligibility criterion of a loan against a property varies from lender to lender. The broad guidelines for eligibility conditions include:

• The age of the applicant must be between 18 - 65 years of age.
• The applicant can be a self-employed or salaried individual. Private limited companies, HUF, NRI, Partnership Firms, and Trusts can also apply for a loan against property.
• The property against which the loan against property is to be applied must be registered in the name of the individual applying for the loan.
• The property must be residential, commercial, industrial, built-up, or land site.
• The title of the property must be clear.
• HUF partners, directors of partnership firms and private limited companies, trustees of Trusts, and coparceners with regular and independent income can become co-applicants of the loan against property.
• Loan against third party property and property owned by sister or associate concerns is not allowed.

Documents Required For Loan Against Property

Borrowers need to submit the following documents to avail a loan against property:

Salaried Employees

For Self-Employed

FAQs

✅What is the maximum amount of loan that can be availed against property?

Loan Against property are restricted to a maximum of 75% of the market value of the property.

✅ Who can be a co-applicant in a loan against property?

·         Spouse, parents and children can be co-applicants in case of individuals applying for a loan against property.

·         HUF partners, directors of partnership firms and private limited companies, trustees of Trusts and coparceners with regular and independent income can become co- applicants of the loan against property

✅ What is a loan against property?

Loan against property is a secured loan. It is an advance taken against a property without selling it. The property remains mortgaged with the lending company till the time the loan is repaid.

✅What is the loan tenure of a loan against property?

Banks usually allow loans against property for a term of 15 years.

✅Which property ownership documents are required for a loan against property?

The property ownership documents required for loan against property:

• conveyance deed
• allotment letter
• sale deed
• latest property tax receipt
• approved building plan
• title deed documents for 30 year
• power of attorney
• proof of title in Revenue Records
• possession letter
• copy of the approved plan of construction or extension
• occupancy certificate