The secured loan market in India offers individuals different options to choose from. They can easily select a home loan (a type of secured loan) to purchase a residential or commercial property. In addition, they can also opt for a mortgage loan (another type of secured loan) by pledging immovable assets (a residential or commercial property) and use the fund to cover personal or business expenses. Here, individuals can find out what a mortgage loan is and its types in detail.
Mortgage loan – An overview
A mortgage loan is a secured loan that enables individuals to avail funds by pledging immovable assets like residential or commercial property to a lending institution. Here, applicants can get up to 70% of the property’s value as the loan amount. Borrowers can use this money to expand business or cover high-value expenses such as educational or marriage expenses as per their requirements. However, the availability of different types of mortgage loans often confuses borrowers. Hence, they must know about these variants to get maximum benefits from mortgage loans.
Different types of mortgage loans
The various types of mortgage loans are discussed below.
- Loan against property
A property loan is a type of mortgage loan that individuals use to fund personal or professional expenses. Here, borrowers must pledge their property to get a loan against property.
They have to deposit the original document of property with lenders throughout the loan tenor (up to 15 years). Individuals have to repay via equated monthly instalments (EMI). For this, they can use a property loan EMI calculator and select a suitable EMI.
- Lease rental discounting
Another type of mortgage loan is lease rental discounting. Leasing residential and commercial property is a common practice in India. Here, owners of these properties can easily avail a term loan against the rental income received.
To be precise, lease rental discounting is a term loan that lending institutions offer against income-generating commercial property or assets. Lenders provide this type of mortgage loan when a particular leased property derives fixed rent which individuals can use as collateral to get funds instantly.
- Second mortgage loan
A second mortgage loan is a type of loan that is taken against a mortgaged property. When individuals purchase a property with a loan, they can still opt for an additional loan on that property to fund personal expenses.
This type of financial product is often called a top-up loan. On the basis of the borrower’s credit profile, lenders decide additional loan amounts. Here, borrowers have to pay EMIs on the initial loan and second mortgage loan.
- Commercial property loan
Commercial property loan refers to loans that businesspersons avail against mortgaging a property that is used for business or commercial purposes only.
Individuals can avail property loans to purchase commercial real estate, properties such as shops, commercial complexes and similar kinds of properties. On the basis of the market value of the commercial property, borrowers get a loan that they can use for big-ticket expenses such as funding a child’s education, business expansion, debt consolidation and many other things.
- Reverse mortgage loan
A reverse mortgage is a unique kind of loan that works exactly in the opposite dimension of a mortgage loan. Introduced especially for senior citizens, this loan allows them (who have property but no regular income) to earn a monthly income by mortgaging property to lending institutions.
During their lifetime, senior citizens get regular income from lending institutions by mortgaging properties to them. Here, lenders provide a fixed amount to senior citizens, just like EMIs. However, on their death, lenders gain the right to sell a property. From the total property selling amount, lending institutions then deduct the amount (given to senior citizens) and give the rest of the amount to the heir of deceased older people.
The different types of mortgage loans mentioned above help individuals understand the inherent aspect of each of these financial products.
Individuals can get access to various types of mortgage loans by fulfilling certain eligibility pointers set by financial institutions. Reputed financial institutions provide high-value mortgage loans against simple eligibility and minimal documentation.
These financial institutions also extend pre-approved offers that ease the mortgage loan process. Such offers are also available on a wide range of financial products like home loans and loans against property. Individuals can check their pre-approved offers by entering names and contact details.
Now that individuals know what a mortgage loan is and its types, they can apply for the right variant as per their requirements and fund both personal and business expenses.