Availing a loan against property (LAP) has become quite easy these days. The procedure can be completed online on websites such as loanbaba.com. However, as an applicant for LAP, you must be aware of certain criteria to make sure the entire loan procedure happens smoothly.
Here are some aspects to check out before applying for a loan against property with a bank or financial institute.
1. The Property Value
Whether you intend to apply for a loan against property on the residential or commercial estate, you must know the monetary worth of the property in question. Suppose you need a loan amount of rupees 40 lacs, but the estate’s current market value is only INR 35 lacs, then getting the entire amount of INR 40 lacs as a loan, is impossible on the concerned property.
The loan amount sanctioned cannot be more than the property’s value. But, you can get up to 70 to 90% of the property’s market value as a loan. If your loan requirement is higher than the property’s cost, then other financing options have to be considered in combination.
In the above case scenario, however, you may be eligible for a lower loan amount, depending on the income you obtain.
2. Income & Repayment Ability
LAP is majorly taken when there is a requirement for a large amount of money. The mortgage loan approval will depend on your monetary income, and repayment ability. Depending on the income, and the EMI scheme’s suitability, repayment tenure will be decided, which is a maximum of up to 15 years. You must draw a comfortable income in order to take care of loans against property payments.
The reason why banks are serious about the applicant’s income status is that a person with regular income will be able to pay the EMIs more consistently than defaulting on its payments. So the bank does not have to worry about selling the pledged property to recover the LAP amount, which would otherwise take intensive time and effort.
3. Co-applicant for Mortgage Loan
If you alone cannot fulfil the income or repayment capacity essential for getting a loan against property sanctioned, then you may be able to bring in a co-applicant. The loan providing institute will run a check on the co-applicant to confirm if he/she and you together can repay the mortgage loan amount or not.
4. Real Estate Ownership
If you are the sole owner of the property, then there must be no problem in acquiring a loan against the same. If there are co-owners who do not agree with your decision of applying for LAP, or the property is disputable with necessary documentation out of place, then the mortgage loan can be rejected.
5. Know the Fees Involved
Apart from the LAP interest rates, there could be other charges such as loan processing fees, pre-closure charges, sales tax, agent costs and more. You must acquaint yourself with all these charges or fees that have to be paid for when applying for a loan against property.