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What is a Loan Against Property?

A Loan against Property is a mortgage loan provided by banks and financial institutions for personal as well as business purposes.

When Should You Consider Taking a Loan against Property?

A Loan against Property can be availed for a variety of purposes ranging from home renovation to purchase of machinery as well as to meet the shortfall of working capital. It is a safe proposition for the banks because they have collateral of the property as support for the finance they provide.

Salaried people opt for mortgage loans to cater to expenses like the educational needs of their children, medical expenses, home renovation, and so on. Business enterprises prefer the Loan against Property as collateral towards Business Loans and for procuring working capital requirements.

A Loan against Property is easy to procure because it is secured in nature. Banks usually maintain a margin while sanctioning a Loan against Property. This margin usually ranges from 50-90% of the value of the property (also known as LTV or Loan-to-Value). This facility is also popular because the borrower can utilize the property in spite of mortgaging it in favour of the bank. 

The difference between a Loan against Property and a Personal Loan is that can take a Personal Loan without providing collateral. However, a Loan against Property requires you to mortgage your property to the lender.

Another significant difference is the rate of interest on a Loan against Property is less than the rate of interest on a Personal Loan. It is primarily because of the security available to the bank. Banks have the option of selling the security and recovering their dues in case of default on the part of the borrower.

There are various types of Loan against Property. While it can be confusing for a first-time borrower, MyMoneyMantra can help you through the entire process. Explore the possibilities with MyMoneyMantra and seal the deal!

Features of a Loan against Property (LAP)

1. Easy to get - LAP is a secured loan. Banks maintain a margin in the range of 50-90% of the value of the property.

2. Longer tenure - Usually banks sanction a LAP between 3 Lakhs to 100 Crores. It is the only loan facility other than the Housing Loan that allows banks to stipulate repayment periods exceeding 10 years. Banks are willing to sanction loans against property with tenures extending up to 15 years.

3. Lower interest rate - In comparison to the Personal Loans, LAPs have a lower rate of interest. The reason is the security offered to the banks.

4. Lower EMI - When you have longer tenure and a lower interest rate than Personal Loans, the EMIs are bound to be lower.

5. Flexibility - Various banks have flexible loan products in this category. They are the term loans and overdraft facilities. You do not have this flexibility with the Personal Loans.

6. Tax Benefits - You get benefits on the Income Tax front if you avail a LAP for home renovation purposes. Usually, customers go for home renovation loans if they have to carry out repairs to the same property to be mortgaged to the bank. You might carry out repairs to your home but avail a LAP by mortgaging another property. Under such circumstances, you have to prove that the end use of the loan is for carrying out renovations to the property you reside in.

Why Apply for a Loan against Property with MyMoneyMantra?

Many types of mortgage loans exist in the industry, i.e., mortgages, commercial mortgages, and industrial mortgages. Each bank has its product and interest rate. It is tedious to compare the products offered by a range of banks.

MyMoneyMantra can help you in this regard. We procure information from various sources and display it on a single screen thereby allowing you to compare a range of products. It helps you make an informed decision. We help you with other aspects of the deal like demographics, income and repaying capacity, and so forth.

At MyMoneyMantra, you have access to:

1. The lowest rate of interest - The comparison on the screen allows you to choose the lowest rate on offer.

2. Lowest processing fees - Usually, banks charge processing fees to the extent of 0.50-1%. As there is an involvement of a high amount, processing fees can constitute a significant chunk of your expenses.

3. Easy documentation - The credit team at MyMoneyMantra helps in completion of documentation formalities.

4. Higher Loan to Value Ratio (LTV) - The LTV differs from bank to bank. At MyMoneyMantra, you will be able to compare the various margin rates and choose the one most suitable for you.

5. Prepayment clauses - These are hidden charges that borrowers usually ignore. It can be in the range of 2-5%. MyMoneyMantra helps you compare the prepayment clauses of various banks and help you find the best choice.

6. Transaction charges - LAP requires the creation of equitable mortgage of property. It can cost you a lot of money ranging from advocate fee, evaluation fee, stamp duty on mortgage registration, and so on. Some banks include the advocate fee and evaluation fee in their processing fee structure whereas some banks charge separately. MyMoneyMantra helps you make this distinction and gets the deal most beneficial for you.

MyMoneyMantra has specialists who have experience of over 28 years in the field of Loan against Property and can help you:

1. Assess your demographic and personal profile

2. Examine your previous repayment record

3. Understand the various terms used by bankers such as Legal Scrutiny Report (LSR), and the other policies of the banks in connection with a Loans against Property

4. Understand the fine print that people frequently overlook

How Do You Apply for a Loan against Property Online at MyMoneyMantra?

1. Indicate the nature of your employment or occupation such as salaried or self-employed

2. Enter the loan amount you are looking for

3. MyMoneyMantra will ask you for your phone number

4. Enter the city where your property is located

5. The next step involves entering your data such as name, gender, and email address

6. Enter the city of your residence and the property value (approximate)

7. Indicate the reason for applying for this loan by selecting the right option from the drop-down

8. You will receive an OTP on your registered mobile number. You will be asked to verify the OTP

9. MyMoneyMantra will give you a list of the best offers on display.

What is the Process for Applying for a Loan against Property?

1. On completion of this process, you will be able to choose the offer that suits your requirements. You should keep your documents and the application forms ready. MyMoneyMantra has a special team to assist you in this regard at no extra cost.

2. The lender has the responsibility of verifying the KYC and income proof documents. The lender would like to inspect the property and have a discussion with the borrower to obtain first-hand information about the borrower?s employment, business, income, and investments.

3. Banks have advocates on their panel to carry out a legal search for the last 30 years to ensure the property is free from any encumbrances and that the borrower has the clear title to it. It is a pre-requisite for the equitable mortgage to be valid and binding on the borrower.

4. The evaluation of the property is the next step following which the banks appraise the loan application for the eligibility amount.

5. On the approval of the loan, the bank sends you the sanction letter that you have to go through and agree to the terms and conditions. MyMoneyMantra helps you in this regard.

6. Finally, you have to execute the equitable mortgage and register it (if registration is compulsory ? It is not so in some states).

7. We help you with the disbursement process as well.

What are the Different Types of Loan against Property?

1. Business Expansion Loans - Business entities can avail this facility for acquiring new machinery, purchase of plant, meeting working capital requirements, and invest in new technology or business. The lending banks require collateral in the form of property, residential, commercial, or industrial. Depending on the nature of the property available as collateral, the lending banks calculate the loan eligibility. For commercial properties, the LTV is around 55- 65%. In the case of industrial properties, the LTV reduces to 40-55% whereas the LTV in the case of residential property is in the range of 65-70%.

2. Working Capital Overdraft Facility - Banks sanction overdraft facilities against the property for meeting the day-to-day working capital requirements. Under such circumstances, the property is accepted as collateral. Lending banks estimate the amount of finance required based on the following figures:

  • Property value and nature of the property
  • Actual working capital requirement calculated as per the internal policies of the bank, usually the Projected Annual Turnover method.

 3. Personal Expenses - Individuals can also avail Loan against the Property for personal expenses such as medical expenses, educational expenses, marriages, travel, as well as for purchasing consumer durables.

4. Home Renovation - Usually, people do not avail this loan for renovating homes as there are separate schemes available at comparatively lower rates of interest. However, there can be circumstances when the borrower might have to resort to avail a Loan against Property for home renovation.

5. Lease Rental Discounting - Some banks offer loans against the future rent receivables, especially in metropolitan and urban areas. One should note that the property that fetches the rent should also be mortgaged in favour of the bank. Banks usually finance in the range of 75% to 90% of the future lease/rent receivables. The tenure of such loans is shorter and should end before the expiry of the lease or the rental

How Do You Calculate the Eligibility for a Loan against Property?

  1. Current income - In the case of salaried employees, the furnishing of the salary slips for the last three months and a bank account statement for the previous six months is necessary. In the case of self-employed professionals or business entities, financial statements like Balance sheets and Profit &Loss statements are required. One should supplement these financial statements with the bank statements to enable the banks to co-relate them.
  2. Continuity of Employment - A letter from their employer that the proposed borrower is employed with them should suffice. You should supplement this information with the Form 16, and IT returns for the past two years. Self-employed and business concerns can submit proof of doing business like GST registration certificates, partnership deeds, and Certificate of Incorporation (for companies).
  3. Current Obligations - The take-home pay norms come into effect. Usually, one should have a take-home pay of 50% after accounting for all the EMIs including the proposed one for the Loan against Property. Hence, it is imperative for the borrowers to declare their current obligations.
  4. Credit History - The lending banks are members of CIBIL (Credit Information Bureau (India) Limited). They can pull out the records from CIBIL to determine your credit score. Usually, a credit score in the range of 600 and above is acceptable.
  5. Value of the Property - Your eligibility depends on the value of the property. The LTV ratio is in the region of 40-70% depending on the location of your property.
  6. Legal Scrutiny Report - Banks have panel advocates to carry out the search of the property in the respective Sub-Registrar office to determine the chain of ownership. This process also enables them to determine if there are any encumbrances on the property. This search is critical as it allows the banks to understand whether you have the eligibility to create the equitable mortgage in favour of the bank.
  7. Age of the Borrower - The minimum age of the borrower should be 21 years at the time of application.

Documents Required for Loan against Property

  1. KYC Documents

The borrower should furnish KYC documents regarding identity proof and address proof. These documents include:

Identity Proof

  1. PAN Card
  2. Aadhaar Card
  3. Voter ID
  4. Passport
  5. Driving Licence 

Address proof

  1. Registered Rent agreement
  2. Aadhaar Card
  3. Driving Licence
  4. Lease agreement
  5. Passport
  6. Latest gas/Electricity bill

2.Income Proof ? Financial Documents

  1. Salary slips for the last 6 months for salaried employees (In addition, IT returns for the previous 3 years along with Form 16)
  2. IT returns for the past 3 years for self-employed persons (Some banks accept 2 years IT returns as well)
  3. Statement of A/c for the past 1 year where your salary is credited (inthe case of salaried people)
  4. Profit and Loss statement and Balance sheet for the last 2 years in the case of self-employed persons
  5. Sales tax, GST registration certificates, if applicable
  6. Partnership deed in case of partnership firms (if the applicant is one of the partners or the firm itself)
  7. Certificate of Incorporation for limited companies(if the applicant is one of the directors or the company itself)

Other Documents:

  1. Loan application form

Property Documents:

  1. Copies of all property documents that can establish the chain of ownership for the past 30 years
  2. Encumbrance certificate for 30 years
  3. Property tax paid receipt

Fees and Other Charges

  1. Upfront fees - Many banks follow the procedure of collecting upfront fees for processing the application. They adjust the fees with the processing fee in case they approve the loan. Remember, this is a non-refundable fee. It is usually in the range of 3,000 to 5,000.
  2. Processing fees - The regular processing fees are in the range of 0.5-1%.
  3. Valuation charges - Normally, these charges are included in the processing fees. But, some banks charge it as a separate entity. These charges are payable to the valuation engineer who determines the value of the property and submits the valuation report to the bank.
  4. Legal Scrutiny charges - Similar to the valuation charges, some banks include these charges in the processing fees. At times, you have to incur these charges separately. It is payable to the advocate who conducts the legal search of the property and submits the Legal Scrutiny Report.
  5. Mortgage Registration charges - Some states in India do not require the registration of the equitable mortgage. It is compulsory in states like Tamil Nadu. You have to incur these charges (0.5% of the loan amount subject to a maximum of 25,000 as stamp duty and 5,100 as equitable mortgage registration charges)
  6. Prepayment charges - Some banks charge prepayment charges to the tune of 2% to 5% of the outstanding loan It depends from bank to bank.
  7. Insurance - Insurance of the property to be mortgaged to the bank is compulsory. Also, some banks have tie-ups with insurance companies who market their products like loan insurance, health insurance, and personal accident coverage. These are optional charges.

Banks That Offer Loan against Property Include

  1. HDFC Bank
  2. ICICI Bank
  3. Axis Bank
  4. PNB
  5. Yes Bank

Non-banking Financial Institutions Offering Loan against Property Include

  1. DHFL
  2. Aditya Birla Group
  3. Capital First
  4. Fullerton
  5. Bajaj Finserve

How to Calculate the EMI?

You can use the MyMoneyMantra EMI calculator to determine your EMI. You get a full chart showing the breakup of principal and interest repayment throughout the entire duration of the loan.

Loan to Value Ratio

This ratio determines the extent to which banks can finance loan against property. It depends on the location and the type of the property.

  1. Residential Property - 65- 70%
  2. Commercial Property - 55- 65%
  3. Industrial Property - 40-55%

Loan Amount and Tenure

The minimum loan amount is 3 Lakhs and the maximum is 100 Crores depending on the value of the property, your repayment capacity, and loan requirements.

The tenure is usually 7 to 10 years. Some banks even extend the tenure to 15 years under exceptional circumstances.

Can You Include a Co-applicant to the Loan?

Yes, you can, as it increases the eligibility. Banks accept spouses and parents as eligible co-applicants.

Here are Some of the Banks and NBFCs That Offer Loan against Property

Name of Loan Provider

ICICI Bank Ltd

Loan Amount

  • No maximum limit
  • Depends on the income of the borrower and value of the property
  • Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 9.50%

Processing Fees

0.50% of the sanctioned loan amount

Eligibility

An individual having a regular source of income and marketable property in select cities of India in their name

Features

Attractive interest rates

Faster processing

Longer tenure

Loans against commercial and residential property

Types of Loan against Property

Start a new business

Fund long-term working capital

Fund children?s education

Repay other high-interest debts

 

Name of Loan Provider

HDFC Bank Ltd

Loan Amount

10 Lakhs to 5 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 9.60%

Processing Fees

1% of the sanctioned loan amount

Eligibility

Individuals having a regular source of income and marketable property in select cities of India in their name

Minimum income - 25,000 per month

Credit score - 650 and above

Features

Attractive interest rates

Faster processing

Longer tenure

Loans against commercial and residential property

Multiple repayment options

Types of Loan against Property

Meet business requirements

Higher education of children

 

Name of Loan Provider

Axis Bank Ltd

Loan Amount

No maximum limit

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 11% for Term Loans and 12% for an Overdraft limit

Processing Fees

0.50% of the sanctioned loan amount

Eligibility

Individuals having a constant and regular source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Minimum age for salaried ? 24

Maximum age for salaried ? 60 years

Minimum age for self-employed ? 24

Maximum age for self-employed ? 65 years

Features

Nil prepayment charges

Lease rental discount facility available

Reward points on your LAP

Overdraft facility available

Types of Loan against Property

Meet business requirements

Higher education of children

 

Name of Loan Provider

Citibank

Loan Amount

25 Lakhs to 5 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 60%

Tenure

Up to 15 years

Interest Rates

Starts from 8.65% to 9.50%

Processing Fees

0.25% of the sanctioned loan amount

Eligibility

Individuals having a constant and regular source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Age - between 23 to 60 years

Features

Option to choose between T-Bill and MCLR rate

Overdraft facility available

Lower EMIs

Excellent customer service

Types of Loan against Property

Meet business requirements

Higher education of children

                                                                                             

Name of Loan Provider

State Bank of India

Loan Amount

25 Lakhs to 7.5 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 10% to 11.45%

Processing Fees

1% of the sanctioned loan amount

Eligibility

Individuals having a regular source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Age - 18 to 70 years

Features

Interest calculation on daily reducing balance

Complete transparency

No hidden fees

No prepayment penalty on floating rate loans

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Standard Chartered Bank

Loan Amount

10 Lakhs to 5 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 9.50%

Processing Fees

1% of the sanctioned loan amount

Eligibility

Borrowers having a regular source of income and marketable property in select cities of India in their name

Minimum Income ? 25,000 per month

Credit score - 650 and above

Age - 21 to 60 years for salaried people, and up to 65 years for self-employed individual

Features

Quick processing of loans

Attractive rates of interest

Higher the income, lesser is the rate of interest

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Punjab National Bank (PNB)

Loan Amount

25 Lakhs to 5 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 10.20% for floating rate borrowers

Starts from 10.35% for fixed rate borrowers

Processing Fees

1% of the sanctioned loan amount

Eligibility

Individuals having a continuous source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Age - 21 to 60 years for salaried people

Age - 23 to 65 years for self-employed individual

Features

PAN India Presence

Instant loan approval in 3 minutes

Complete transparency

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Yes Bank

Loan Amount

25 Lakhs to 5 Crores

Depends on the income of the borrower and value of the property ? Margin ? 15% of the property value

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 10%

Processing Fees

1% of the sanctioned loan amount

Eligibility

Individuals having a regular source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Age - 18 to 60 years

Features

Loan up to 85% of the property value

Low EMI

Overdraft facility available

Excellent customer service

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Dewan Housing Finance Limited (DHFL)

Loan Amount

40 Lakhs to 10 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Stars from 12%

Processing Fees

2% of the loan amount

Eligibility

Individuals having a regular source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Age - 21-60 years for salaried and up to 65 years for self-employed

Features

Higher loan limit

Balance transfer facility available

Simplified documents

No prepayment penalty for floating rate borrowers

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Aditya Birla Group

Loan Amount

20 Lakhs to 30 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 10% to 11%

Processing Fees

0.50% to 1% of the sanctioned loan amount

Eligibility

Individuals having a continuous source of income and marketable property in select cities of India in their name

Minimum income ? 25,000 per month

Credit score - 650 and above

Age - 21 to 60 years for salaried individuals, and up to 70 years for self-employed individuals

Features

Attractive interest rates

Quick and transparent processing

Residential and commercial property allowed

Multiple choices of repayments ? EMI and structured repayments

Balance transfer facility available

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Fullerton India

Loan Amount

10 Lakhs to 10 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from10% to 11%

Processing Fees

1% to 3% of the sanctioned loan amount

Eligibility

Individuals having a constant source of income and marketable property in select cities of India in their name

Minimum Income ? 25,000 per month

Credit score - 650 and above

Age - 21 to 65 years

Features

Transparent processing

Balance transfer facility available

Prepayment charges - 4% to 5%

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Capital First

Loan Amount

20 Lakhs to 10 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 10% to 11.45%

Processing Fees

Up to 1% of the loan amount

Eligibility

Individuals having a proper and regular source of income and marketable property in select cities of India in their name

Minimum Income ? 25,000 per month

Credit score of 650 and above

Age - 23 to 70 years

Features

Loan available on residential, commercial, and industrial properties

Easy repayment options stretching up to 15 years

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

 

Name of Loan Provider

Bajaj Finserve

Loan Amount

25 Lakhs to 7.5 Crores

Depends on the income of the borrower and value of the property

Fixed Obligations to Income Ratio ? 65%

Tenure

Up to 15 years

Interest Rates

Starts from 9.50% to 12%

Processing Fees

1% of the sanctioned loan amount

Eligibility

Individuals having a constant source of income and marketable property in select cities of India in their name

Minimum Income ? 25,000 per month

Credit score - 650 and above

Minimum Age ? 25 years

Features

Quick turnaround up to 72 hours

Loans against residential, commercial, and industrial property

Flexibility of repayments

Customised insurance scheme

Types of Loan against Property

Meet business requirements

Higher education of children

Medical expenses

Any personal expenses other than speculative purposes

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.                   

Talk to our Loan Specialists toll-free at 18001034004 to know more about our products and offers.

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