Mortgage Loans: Meaning, Benefits & Types Explained

"Mortgage" refers to providing some form of collateral or guarantee to a lender when taking a loan. As they are a type of secured loan, Mortgage Loans can provide a sizable amount of money, ideal for several purposes.By understanding the meaning of Mortgage Loans and their types, you can take an educated step toward fulfilling your financial needs, especially those related to residential and commercial property.

Mortgage Loans help you get funds by putting up immovable assets, including commercial and residential properties, as collateral. Since Mortgage Loans provide collateral to lenders, they usually have lower interest rates compared to many other financing solutions.Also Read: What Is a Subprime Mortgage?

In a Mortgage Loan, you will receive a certain amount as a loan from a bank or a financial institution. As collateral, you would need to put up some property. If you default on your Mortgage Loan, at first, it will just impact your credit score, but it will impact any loans you take in the future. However, if you keep defaulting on your Mortgage Loan, the lender will be forced to foreclose on your property. Banks and financial institutions would prefer not having to foreclose on your property since, unlike mortgage repayment, it creates an asset that is difficult to convert to cash.Also Read: How To Avail A Loan Against Property Without Income Proof?

• One of the main benefits of Mortgage Loans is that you do not need to give up the ownership of your property.
• You get to access a significant amount of funds, up to 60% of property value for commercial property and up to 70% of property value for residential property.
• There are not many loans that provide as much funds as mortgages.
• Also, the tenure on Mortgage Loans can be up to 20 years, giving you ample time to repay.
• The interest rates on Mortgage Loans tend to be the lowest among loans to individuals.

Mortgage loan eligibility refers to whether you can get a mortgage or not and how much Mortgage Loan amount you are eligible for. It is calculated based on age, property location, property value, occupation, monthly income, monthly expenses, net monthly variable pay, desired interest rate and city of residence.

To apply for a Mortgage Loan, you need to have the following documents:

• Identity proof: Documents like your passport, voter's ID, driver's license, job card issued by NREGA, Aadhar Card, registration certificate or PAN card.
• Proof of income: Latest three months' salary slip showing all deductions and Form 16 for salaried individuals, IT returns or financial documents for the last two years, and computation of income certified by a CA for the last two years for self-employed people.
• Bank statement: Latest six months.
• Proof of other income: Rental receipts or other such documents showing receipt of income.
• Property documents: Copy of title documents and approved sanction plan.

• To apply for a Mortgage Loan, head to our Mortgage Loan page .
• Then, find the link to apply for a loan against property.
• Then, you enter the loan amount, tenure, and interest rate, and then click on the apply button. You can choose to first calculate your eligibility based on your income, tenure, occupation type, salary, and various other factors.
• You can also apply via email by writing to us at care.housingfinance@adityabirlacapital.com .
• You can also apply by calling us at 1800 270 7000 or downloading the application form from the website, filling it out and submitting it to the nearest branch, or directly visiting one of our branches.

At Aditya Birla Capital, the interest rates on Mortgage Loans range from 7% to 11% . Compared to Personal Loans with interest rates as high as 20.25% , Mortgage Loans are the cheaper option. Since there is a valuable collateral asset, the risk is low; hence, interest rates on Mortgage Loans are low in comparison to unsecured loans.

Following are some of the charges you might encounter when you take a mortgage:

• Foreclosure charges before and after the lock-in period are over
• Part pre-payment charges
• Default penal interest rate
• Cheque return charges or ECS/SI/NACH failure charges
• Accrued interest
• Cancellation charges
• Closure charges for OD/LOC
• Charges for a request for copies of documents of any collateral held with the lender
• Charges for duplicate Statements/Repayment Schedules/FC statements/any other document held with the lender
• Charge For Exchanging PDCs, Security Cheques (Per Set) / ECS /NACH
• CIBIL/Credit report retrieval fee
• Loan rescheduling charges
• NOC issuance charges
• Swap/Conversion Charges
• Property swap charges
• Stamp Duty, legal and other statutory charges
• Insurance Premium
• Creation charge with ROC

Before applying for a Mortgage Loan, look for a schedule of all charges at the lender's site to know all the details about charges and fees involved in Mortgage Loans.Read more: Detailed Guide on Mortgage Loan Interest Rates, Charges, and Eligibility

A mortgage calculator can help you ascertain how much EMI you need to pay. Some mortgage calculators also help you understand how much Mortgage Loan amount you will get.The mortgage calculator provided by Aditya Birla Capital is also a Mortgage Loan eligibility calculator. It takes the following factors as inputs:

• Property identified or not
• Loan amount
• Loan tenure
• Occupation type
• Monthly take-home salary (post-tax)
• Existing monthly expenses
• Net monthly variable pay (post-tax)
• Interest rate
• City

Aditya Birla Capital's mortgage calculator will show your EMI and potential Mortgage Loan amount.

By taking a Mortgage Loan against your property, you will receive a certain sum of money you need to repay in instalments. But, you do not need to repay a reverse Mortgage Loan. The bank or financial institution will recover the funds from selling your property.Also, in a reverse Mortgage Loan, you will receive the sum in instalments instead of a lump sum at the beginning. Reverse Mortgage Loans are for senior citizens without a regular income.

1. Loans Against Property

Loans Against Property, also known as LAP, involve providing your already-owned property as collateral for a loan. Such a loan can be availed against residential, commercial and industrial properties.The amount you can get with a Loan Against Property can range up to 60% of the mortgaged property's value in the case of a commercial property or up to 70% in the case of a residential property. The amount can also differ from lender to lender, ranging from ₹ 5 lakhs to ₹ 25 crores.Additionally, the repayment tenure for such a loan goes up to 15 years. One of the main benefits of a LAP is that the funds from this loan can be used for various purposes, from home interior to emergency travel.Read More: Learn more about our Loan Against Property

2. Construction finance

You may decide to build a property on a plot of land you own. While this may be an excellent opportunity to design your dream home, you should know that construction takes a long time and involves significant funds. A shortage of funds at any stage in the construction process can result in the project being stalled mid-way. It is a common occurrence with many housing and commercial development projects in India.If you plan to construct a property, this is an ideal way to do it. The lender holds project receivables and the property to be built as collateral for construction loans.The tenure of construction loans can stretch up to 360 months, depending on the lender. It ensures ample time to repay the loan without impacting your current lifestyle and expenses. You should know that the total loan amount is based on the evaluation of the construction cost, your repayment history and capacity.Read More: Know more about construction financing

3. Lease rental discounting

A lease rental discounting loan is a term loan that property owners who receive rent can use to obtain funds. The loan amount available here is calculated based on the present value of rental cash flow and the property's current market value.For instance, a lender like Aditya Birla offers Lease Rental Discounting Loans at a minimum of ₹50 lakhs, with tenures that go up to 15 years. The benefits of this loan type include attractive interest rates and quick processing.Read More: Learn more about lease rental discounting

4. Commercial property purchase loan

Need to expand or diversify your business operations but need the funds to make it possible? This is where a commercial property loan can help. Depending on your choice of lender, you can use a commercial property loan for construction, purchase or renovation purposes.The maximum amount available with this loan is 65% of the property value. Interest rates vary from one lender to another, and the tenure to repay a commercial property loan stretches to 15 years in most cases.Read More: Know more about our commercial property purchase loan

• Mortgage Loans are available in different types. They can go a long way in helping you attain your goals, whether for business opportunities or personal requirements.
• It is important to know exactly how much funds you need and its use, as this can help pick the right finance solution.
• When building a property, mortgage finance can ensure no hiccups during the construction stages, so you get your property as quickly as possible.