With every passing day, loans are becoming more inclusive, and the approval process less stringent. Loans are more diverse than ever before.
A loan against property is one of the most reliable, quick, and feature-rich loans offered by Indian lenders. The various benefits of loans against property or mortgage loans make it one of the most popular loans.
This article discusses the top-5 benefits of a loan against property.
Use it for any purpose
You may use a loan against property for any reason you wish to.
The top reasons why people apply for low-interest mortgage loans are the following:
- Send children abroad to study or sponsor their higher education at reputed institutions inside the country
- Pay medical bills over and above the amount covered under medical insurance
- Sponsor wedding expenses of self or relatives
- Fund an international or domestic vacation
- Construct a house or buy a plot of land
- Expand an existing business or set-up a new manufacturing facility
- Low Rates of Interest
Mortgage loan interest rates or loan against property interest rate are generally much lower than other types of loans. As lenders issue mortgage loans only after receiving collateral securities, there is virtually no risk of default. Lenders use this element of assurance to offer low-interest mortgage loans to borrowers.
At present, the floating rate of interest for mortgage loans is between 10.25% and 11%.
Simple Approval Process
The approval process of a property loan is much simpler than many other loans. Once the lender gets satisfied with your credit score and repayment capacity, a valuer would visit your property and quote the loan amount you are eligible for.
After you and the lender agree with the terms and conditions, it is a matter of time before the loan amount gets credited to your bank account.
High Loan Amount
In many other loans, monthly income, the stability of income, and the debt repayment track-record of the borrower play a major role in the loan approval. Such is not the case with a loan against property. Although lenders carefully evaluate all aspects related to your professional or business profile, the primary focus is always on the property’s valuation and legal status.
Any best-in-class lender would approve a loan amount of up to 60% of your property’s market value. It also allows you to apply with someone as a co-borrower, in which case the income of both borrowers will be clubbed during the loan approval process, thus enabling you to avail of a higher amount.
Avail Tax Deductions
Many borrowers treat a loan against property as a tax-saving instrument. There are two ways in which you can save taxes on the interest of a mortgage loan.
- Under Section 37(1), you can claim a tax deduction on the mortgage loan interest or and related costs. However, you cannot get tax benefits on the principal.
- Under Section 24, you may claim deduction on interest payment of up to Rs 2 lakh, if you use the loan amount to finance a new house.
Other than the benefits discussed so far, a loan against property has several other benefits like long repayment tenure, flexible repayment options, no prepayment charges, and many other features.