Carrying out projects like home construction, home extension, home renovation, etc. requires substantial capital. Also, acquiring a plot of land or a residential or commercial property demands vast financing. It may not be possible to make such a lump-sum payment upfront for a lot of people. It is where a mortgage loan can come to your service.
The high-value financing and easy repayment option offered by mortgage loans provide an excellent way to undergo your big-budget projects seamlessly without having to worry about funds. There are plenty of financial institutions offering competitive interest rates, making it an affordable option. Let us know the nitty-gritty of mortgage loans.
Insight about mortgage
In general, a mortgage is a term used for the property that the borrower pledges to the lender as security against the loan amount. Section 58(a) of the transfer of property act states the definition of a mortgage as an immovable property whose ownership is transferred to the lender to secure the fund sanctioned by him or her.
What is a mortgage loan?
This loan is a secured loan in which the lender demands collateral against the loan amount. The mortgaged property is kept with the lender as security and reestablished to the borrower after the successful payment of the loan. In case the borrower fails to repay the loan, the property mortgaged can be forfeited by the lender to get back the remaining loan amount.
Types of property that can be mortgaged
- Residential property
You can readily mortgage your home or flat to get a loan amount against it. In case you own a flat where you do not live but have it as an investment, you can seamlessly mortgage it to get a property loan. You can pledge your home as a mortgage to get a loan to carry out projects like home extensions, constructions, renovations, etc. as you want. The property worth is calculated based on the current market price, and the maximum approved loan amount is decided accordingly based on it.
- Commercial property
In case you own a property that you have put into use for running your business or leased it to someone else, you can use it as a mortgage to get a loan at an affordable mortgage loan interest rate. You can use the amount in the expansion of your business, upgrading equipment, hiring workforce, or any other requirements that your business demands.
An empty plot of land can also be mortgaged to get a loan against it. You need to have the title deeds of the property for the verification procedure. It is to ascertain that the piece of land belongs to you. The mortgage loan amount can be used to start any construction on the mortgaged property but requires the lender’s approval.
Things to consider before mortgaging your property
It is essential to get your property insured before you can mortgage it to get a property loan. The insurance policy should cover for the damages caused to the pledged property and should be valid throughout the loan tenure. It is something to consider since any damage caused to your mortgaged property will lead to a depreciation in its value. Although it is not mandatory to have the mortgaged property insured under the guidelines established by the Indian government, you can also opt for mortgage insurance from your lender in case you do not have one.