Buy a cost effective loan against your property

by Unknown 22:40 1 comments loan against property

In times of financial turmoil, it is one’s personal property that comes to the rescue. Today, land and property have become the most important assets for individuals and businesses. They yield extremely high returns on sale. They also offer lucrative liquidity when placed as collateral.

Owning a house or a commercial property is not just an excellent addition to one’s financial portfolio. It is also a symbol of one’s robust credit score and helps one liquidate it when needed. If a person faces a sudden financial crunch or wants to invest in a bigger property without enough monetary means, he can simply sell off an owned property to raise money.

Instead of selling off precious assets like property, it is better to raise a loan against it. This loan is called a loan against property. It can be raised without selling off the property and thus, is an option for immediate liquidity.

Why a loan against property?

Selling off property to make money will yield cash in the short term, but the property is gone forever. Instead, a loan raised against it keeps the property intact and also raises capital for use. Like other loans, it is payable in regular EMIs and is given for a fixed tenure.

A cost effective loan solution

However, one must be careful to take a loan that is cost effective and is offered by a stable home finance institution. A good loan against property will have low interest rates and the chance to repay through EMIs or structured repayment. Look for a tenure not longer than 15 years, and minimal paperwork. This last factor is crucial if you are in urgent need of funds.

Normally, the residential or commercial property owned by you can be put up as collateral. Some housing finance companies also consider first time home or commercial space purchases against these loans; the property is collateral in this case as well.

You cannot sell the property until the loan is paid off, though you may be permitted to lease it out with permission from the housing finance institution. The loan amount is calculated to about 70% of the property’s current market value.

Defaulting on repayments results in the property being attached by the home finance institution.

How much loan amount will you get?

If you are based in Delhi or Mumbai, you stand to get a minimum loan amount of Rs 25 lakh, while the amount is about Rs 15 lakh for other locations. Residential properties will fetch a loan amount of up to 70% of its value, and commercial properties will fetch up to 60% value.

The housing finance institution will scrutinise the property papers and the applicant’s share certificates (in case of a resale property). The loan will be processed faster if the applicant has a good credit rating and no outstanding loans in his name.