SBI Loan Against Property Interest Rate

Personal loans are clean loans without any security. Hence, the risk factor is high. Loans against property are secured loans. SBI has the backing of collateral in the form of equitable mortgage of the house. The Loan to Value Ratio is also in the range of 60% to 65%. Thus, the bank has adequate security to rely on in the case of a default. Therefore, risk perception is less. It reflects the rate of interest accordingly.

Home loans are priority sector finances. SBI offers home loans for the creation of an asset, and hence, there is a productive use of the loan amount. Loans against property are against the security of an asset. There is no asset creation because of the Loan Against Property. The purpose of the Loan Against Property is for meeting personal and business emergencies. Therefore, the rate of interest on home loans is less when compared to the Loan Against Property.

SBI offers Loan Against Property to enable the borrower to meet personal or business emergencies.

Personal expenses can include medical expenses, marriage, education, and any other purposeful activity. The borrower undertakes not to engage in speculative activity with the use of a Loan Against Property.

Business expenses include expansion of business, meet day-to-day requirements of working capital, purchase long-term assets, and so on.

The salaried person has a fixed recurring income. The source of income is a stable one. On the other hand, a self-employed person could have a higher income as compared to a salaried person. However, profit is not a regular one. There can be wide fluctuations in the monthly income. Therefore, SBI considers a self-employed person as a riskier proposition when compared to a salaried individual. It explains the difference in the interest rate structure.

The following factors play a critical role in deciding the applicable interest rate on Loan Against Property.

• The nature of employment or occupation of the borrower
• The type of income of the borrower
• The amount of loan
• The type of property offered as mortgage
• The credit rating of the borrower

SBI considers all types of income when deciding the eligibility for a Loan Against Property.

• The different types of income include salaried income, business income, rental income, and so on.
• If more than 50% of the total income of the borrower is salaried income, the rate of interest is different from that of a self-employed person.
• If rental or business income comprises more than 50% of the total income, the rate of interest is higher in comparison to salaried employees.

The distinction is because of the stability of the income source. The more stable the source of income, the less is the risk.

It depends on the loan tenure you agree with the bank. The bank cannot go beyond 15 years for the repayment of a Loan Against Property. If you decide for 15-year repayment tenure, any upward revision in the interest rate will cause the EMI to increase. However, if your loan tenure is less than 15 years, the bank can keep the EMI constant and increase the mandate accordingly.

SBI has a specific EMI/NMI concept where the EMI on Loan Against Property cannot go beyond a specific proportion of the net monthly income. Accordingly, the bank has to fix the tenure or adjust the loan amount.

Yes, you can offer the same property subject to satisfying the LTV ratio of both the loans put together. This example can help you to understand better.

• Housing Loan outstanding amount - 10 Lakhs
• The market value of the property - 80 Lakhs

If you satisfy the income criteria for a home loan and Loan Against Property, the maximum credit you can get will be calculated as follows.

• Security required for housing loan - 90%, say approximately 12 Lakhs
• The balance of 68 Lakhs is available as collateral for the Loan Against Property
• Against this security, you can get a maximum loan of 44 lakhs (around 65%)
• Therefore the total exposure will be 54 lakhs (LTV 67.50% - acceptable)

You have to create a new equitable mortgage to cover the Loan Against Property. The registration of the MOD depends on the state where you reside and the total loan exposure. If you have already registered the mortgage for an amount more than 54 Lakhs, you do not have to register it again. Otherwise, you have to do so.