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Thursday, September 12, 2019

How Does Mortgage LOAN Work for Real Estate in India?


How Does Mortgage LOAN Work for Real Estate in India?

 The year 2018 saw a 24% increment in the purchase of the residential property. This number to increase even in the coming years. The substantial growth in the economy in India is followed by the exponential growth in the real estate sector.   

Purchasing your own home is a huge investment, and takes a financial toll on your budget. To minimize the stress many financial institutions and banks offer loan against property. The whole mortgage loan process is designed for the benefit of the customers.

Considering the benefits it has towards the customer, many lenders make it easy to apply for such loans with minimum documentation and straight forward application process.



But before we start discussing mortgage loans, let us first address explain the difference between home loan and mortgage.

Yes, many times we use this term interchangeably without realizing these two terms are different altogether


What is the Difference Between Home Loan and Mortgage Loan?

    To utilize a loan from the market, you need to provide some kind of collateral as security. This is true for all kinds of mortgage available. So in other words, a home loan is a type of mortgage loan. While you can use other assets as security in a home loan, mortgage works specifically by burrowing your property as security. But most home loans in India are mortgage loans and hence the confusion. Bank can seize your property in case you fail to repay the loan.

    Home loan has a pre-set nature - means you can use the allocated money only for the purchase of the property. While the mortgage money can be used for other purposes,

    In the case of home loans, the payment is done directly into the seller’s account to make sure the funds are properly utilized. In the case of mortgage loans, there is freedom to use the money anywhere they chose and is transferred in borrower’s account.

    The interest rates you pay on home loans is relatively less than a mortgage loan.





How Do Mortgage Loans Work?

    The mortgage installments comprise of the principal amount, mortgage rate of interest, insurance charges and tax charges.

    A huge amount of capital can be raised through mortgage loans. However, the borrower must only withdraw the amount they are capable of returning. 

    The property details and the time of transaction must be notified to the lender.

    The closing charges have been withdrawn by the RBI. SO, before signing any document please read the instructions, terms and condition carefully.

    The borrower must pay the initial 15% of the amount before commencing the project.



Types of Mortgage Loans

Simple Mortgage Loan -

In this kind of Loan, the lender has the right to sell the property in case the borrower fails to repay the loan. Here the lender doesn't become the owner of the property and the rights and the rights remain with the borrower.

Mortgage by the conditional sale -

In this type of mortgage, the mortgagor has the right to sell the property in case the mortgage remains unpaid by the mutually decided date or the sale has no considerable value or the buyer transfer the property to the seller.

Usufructuary Mortgage -

    The complete possession of property is delivered to the borrower
    The lender is to get rent paid instead of interest or principal amount or both
    There is no personal liability incurred by the borrower
    The lender cannot sue for sale


English Mortgage -

    The mortgagor must compulsory bind themselves to repay the amount on a certain date.
    In case of failure, the mortgaged property should be assigned to the lender
    The borrower will recover the property once the payment is made


 Mortgage by Deposit of Title Deeds -

In this kind of loan, the transfer of property is delivered to an agent for safeguarding. And this kind of mortgage does not require registration and is at par with any other legal mortgage.


Anomalous Mortgage -

This loan is a mix and match of different terms and conditions mutually decided by the borrower and the lender


Reverse Mortgage -

As the name indicates, the proceedings of the loan happen in reverse mode. Here the lender pays the amount in monthly installments.




Eligibility to Avail a Mortgage Loan in India

The economy of India is booming and infrastructure development is always a proof of developing nation. With government pushing the real estate sector to new height, the eligibility criteria are kept to bare minimum. Premium residential projects in Pune, Mumbai, Delhi, and Bangalore are witnessing an all-time high demand and hence the eligibility criteria are kept minimum, which is as follows:

For Salaried Individual

    The age criteria should fall between 33 to 58 years
    You should be a salaried individual in a MNC, private or public sector
    You should possess an Indian nationality


For Self-Employed Individual

    The age criteria should fall between 25 to 70 years
    You should be a self-employed individual with regular flow of income
     You should possess an Indian nationality



Documents Required in Mortgage Loan

For Salaried individuals

    Latest Salary Slips with forms indicating the tax deducted
    Completely filled application form with attached photographs
    Proof of Identity
    Residence proof
    Copy of the documents of the property to be mortgaged
    I.T. returns

For Self-employed individuals

    Completely filled application form with attached photographs
    Identity proof
    Residence proof
    Copy of the documents of the property to be mortgaged
    Proof of existing business
    Bank statements validating the latest income source
    Profit and loss computation of previous months
    I.T. returns of last 3 years



Advantages of Availing a Mortgage Loan

    A mortgage loan helps in increasing the buying capacity of an individual
    If anything goes wrong, the lender has the right to sell the property and hence the rates of interest are low on mortgage
    The repayment amount is divided into easily payable monthly installments
     A good credit score is reported if you pay your mortgage loan on scheduled time. This score will help you avail different loans at low rate of interest
    Availing mortgage loan qualify you for many tax benefits


Disadvantages of Mortgage Loan

    Mortgage loan accompanies rate of interest and hence in the end you will be paying principal amount plus the rate of interest
    Hidden charges like legal fees, insurance fees, etc. will come upon you as an extra burden when you actually start repaying your mortgage.
    Unlike the fixed rate of interest, the rate of interest changes periodically depending on market conditions


Conclusion

I hope this article clears the basics of mortgage loan. The real estate sector is booming in India. It is always be on the beneficiary side to get acquainted with all the terms and processes related to real estate.  

How Does Mortgage LOAN Work for Real Estate in India? Reviewed by Investment Guru on September 12, 2019 Rating: 5 How Does Mortgage LOAN Work for Real Estate in India?   The year 2018 saw a 24% increment in the purchase of the residential property....

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