Loan against property or LAP offers access to multi-usage funds, which an individual can avail by mortgaging a property he/she owns. LAP loans are known for their high-value principal and nominal interest rates. The borrowable loan amount depends on the market value of the mortgaged property. An individual can borrow up to 40% to 70% of its value as LAP. The affordability factor of a LAP, however, depends on loan against property interest rates.
A thorough understanding of property loan or LAP, its cost, features, terms, conditions, loan against property eligibility, etc., is required before one proceeds with its application. An informed decision in this respect makes your loan repayment a lot easier.
5 Points to remember while availing a loan against property
- Loan principal you require
A borrower must pre-assess how much credit he/she requires on a property loan. Doing so will also help find the ideal lender who will provide sufficient credit. The borrowable principal could also vary depending upon your employment type.
- Interest rates
Loan against property interest rate might vary as per your income, loan principal, repayment tenor, credit history, etc. It is also likely to vary from one lender to another. While you are planning to borrow a mortgage loan, you must also simultaneously check which lender is charging affordable loan against property interest rates.
- Other charges on LAP
Other additional charges which are levied on a loan against property are –
- Processing fees
- Statement charges
- Penal interest
- LAP Interest and principal statement charges
- EMI bounce charges
- Mortgage origination fees
These charges will have to be paid by a borrower on LAP in addition to the loan against property interest rate. Thus, while estimating the cost of borrowing in the case of LAP, take these charges into consideration.
- Eligibility criteria
Every lender sets certain eligibility parameters for borrowers under different kinds of loans. LAP also comes with its set of eligibility requirements. Only such applicants who qualify for property loan eligibility can avail this loan. This usually includes factors like age, employment, income, credit history, etc. Before applying for a LAP, make sure these parameters are in your favour.
- LTV ratio
LTV ratio stands for loan-to-value ratio. It refers to the amount that an individual can secure against the value of the property pledged. The government has set a cap on this LTV ratio, beyond which a lender cannot disburse the funds. Thus, apart from a loan against property interest rate, you must also consider the LTV ratio to learn about your total borrowing cost.
- Tax benefits on property loan
Borrowers can enjoy tax benefits on loan against property if they channel the funds towards meeting specific requirements. For instance, if the funds are utilised to finance the purchase of a new house, individuals can avail a tax benefit of up to Rs.2 lakh on the interest repayment under Section 24 (b) of the ITA.
Property loan provides funds for varied requirements needs. Individuals can utilise the funds availed through a loan against property to meet various requirements, including undertaking the renovations of a house, meeting expenses for travelling, funding medical emergencies, etc. The loan against property interest rate is nominal and allow individuals to enjoy a low overall cost of borrowing.
Several financial institutions also extend pre-approved offers on these loans, which can help to streamline the application process. These offers can be availed on various financial products, including loans against property, home loans, etc. Check your pre-approved offer now by entering your name and mobile number. The eligibility to avail a LAP is almost similar to home loan eligibility criteria. You can draw a parallel between the two and determine which of these is a better loan option for your fund needs. Any decision in this matter must be made, keeping the repayment liability in the forefront.
