Mortage Loan

A complete study about mortgage loan.

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What is mortgage loan?
Mortgage loan is termed so when a person pledges his property to support availing loan from banks or
financial companies. Property can be a house or any such property of his own that equals the total loan
amount that he wants to get from financial companies. The borrower will get ready cash against the
value of property that he keeps as collateral.

Mortgage Loan

Advantages of availing mortgage loan:
1. Mortgage loan ensures good amount of cash in hand when a person is in lack of money for his
essential needs.
2. Both the lender and the borrower need not worry if anything goes wrong in repaying the loan
amount as a property stands as support to close the debts that are remaining.
3. The borrower can avail maximum term to repay the loan amount that allows him to manage all
his commitments depending upon his income.
4. Availing mortgage loan allows the borrower to enjoy the benefits in the reduction of tax values.
5. Interest rates are much lower when compared to other loans.

Mortgage Loan
6. Finding ideal options that suit the circumstances of the borrower.
Disadvantages of availing mortgage loan:
7. Including interest, the total amount that that he repays to the bank will be much higher than the
amount borrowed while choosing long term plans.
8. There is a chance for losing the property that he has arranged as collateral.
9. In case of balloon rider mortgage plans, the borrower has to repay a huge amount at the end of
the tenure period.

Requirements and processes involved in availing Mortgage loan:

Eligibility:
> Generally the age limit of the borrower is maintained as 21-58 years.
>The borrower should be employed or should be running a business where his turnover should
be at least 40 lakhs.
> The minimum income package of the borrower is stated as 20000 per month.
> The borrower should possess at least 2 years of experience in the current specified job or
business.
> The borrower should be residing at the specified address at least for a period of 1 year.
Documents required:
> Photocopy of voter ID/Passport/PAN card/Driving License
> Recent photographs (2 copies)
> Address proof: Recent Utility bill or License agreement or passport
> Bank statement for the past 6 months

Mortgage Loan

> Last 3 months salary slip or latest salary certificate with form 16 as income proof for salaried
professionals.
In case of business people; the income tax returns, balance sheet, audit report for the past 2
years. Business people should also submit their office address proof, office ownership proof and
business existence proof. Last 1 year bank statement should be submitted.
> In case of any existing EMI, the borrower should submit the payment track record and sanction
letter offered by the financial company or bank.
> The borrower should also submit the investment proof like investments in shares, fixed deposits
etc., if any exists.

Process:
Once the borrower submits the application for availing mortgage loan, the lender will allow his
application to go through the documentation and verification of documents processes. Once all
his documents are clear, his request for mortgage loan will be sanctioned. This process generally
takes 7 to 10 working days.
Note: Upto 80% cash of the total value of the collateral can be availed through mortgage loan.

Types of Mortgage loans:
The mortgage loan is defined into two major types
1. Fixed rate mortgage loans: The type of loan in which the interest rate doesn’t change or
cannot be changed throughout the tenure period. The borrower has to pay the amount
along with interest rate as signed during the initial processes.
2. Adjustable rate mortgage loans: Here the interest rate is subjected to change as per the
requirements of the borrower’s repayment capacity. Usually the change in interest rate
takes place annually.

Mortgage Loan

Apart from these major types there are other types of mortgage loans available in the market as :

Repayment mortgages: The mortgage type includes paying a part of capital amount along with the
interest specified which results in the complete repayment of loan within the tenure period signed.
Offset mortgages: The mortgage type which is linked to the savings account of the borrower where the
lender deducts the monthly repayment cash from the savings.

The advantage of this type is that the borrower need not pay tax. But there will be no increase in the interest rate of his savings account.

Cash back mortgages: This type of mortgage is not provided by all lenders. This is a kind of incentive
provided by the lender to their borrowers. They will repay a percentage of loans back to the borrower. It
is to be noted that the borrower must be very careful and should not fall prey as the lender may
increase the interest rate that substitute the incentive.

Mortgage Loan

Tracker mortgages: The interest rate will be moving as per the basic rate (generally Reserve Bank of
India (RBI) rate) set up by the lender. If the basic rate rises, his interest rate rises and comes down when
the basic rate lowers.
There are also options for first-time borrower to make flexible choices.
When a person chooses to avail a mortgage loan, the advantage is that the lender may not have much
apprehension about the recovery of the loan since he has a property to offset any loss.

Mortgage Loan

Thus the  borrower stands to gain as he has an additional advantage of getting more loans against the mortgaged property, provided he promptly repays the loan within the stipulated time. Further he can get any amount of loan he desires subject to the extent of collateral surety he pledges.

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