Mortgage Loans

The primary meaning of a mortgage loan stands as a loan disbursed against a property as collateral. Thus one needs to provide a collateral or security for mortgage loan.

Co-applicants are co-borrowers for loan against property. A co-owner of a specified property must always be a co-applicant for a loan against that residence. However, financial institutions entertain only specific relatives to co-apply for mortgage loan. Individuals under 18 years cannot be considered co-applicant.

Parents can co-apply for such a loan with their sons or unmarried daughters. Two brothers can also avail credits in such a manner. Similarly, spouses can opt for a joint home loan or loan against property. Nevertheless, some relatives, such as a brother-sister or two sisters, cannot avail joint loans.

Friends are also disqualified from applying for joint mortgage loan. Joint loans lead to hefty benefits, such as enhanced eligibility. Both the borrowers’ credit score and history are considered before loan processing occurs. Additionally, joint property loan also let the applicants avail tax deductions, enabling all the co-borrowers to claim tax benefits on principal repayment and interest payment.

The property on which you want to take mortgage loan should be comprehensively insured for an amount not less than the value of the property and it should cover all risks.

No foreclosure charges or part pre-payment charges are applicable, if borrowers are individuals, loan availed on floating interest rates and loan taken for purposes other than business use.

Difference between a mortgage and a reverse mortgage loan are as follows:

• A mortgage loan provides finances against the mortgage of an immovable asset. A reverse mortgage loan provides funds against a residential property’s equity build-up
• The regular mortgage loan can be availed by mortgaging either a residential or a commercial property or machinery. But only a residential property, where the borrower resides, can be used for reverse mortgaging
• Mortgage loans can be availed by all types of borrowers. Reverse mortgages are only meant for senior citizens
• Mortgage loans are repayable over a decided tenor. But under reverse mortgages, no repayment is required until the demise of the borrower or nominee
• Repayment liability under mortgage loans includes the principal plus interest. Under reverse mortgages, repayment liabilities can never exceed the reverse mortgaged property’s value

While the terms "mortgage loan" and "home loan" are often used interchangeably, there is a slight difference between the two. Essentially, a home loan is a type of mortgage loan. A home loan specifically refers to a loan that is used to purchase a property or home, whereas a mortgage loan could be used for other purposes such as refinancing or home improvements and is secured by the borrower's property.

A mortgage loan or a loan against property has several advantages. Firstly, it allows you to leverage the market value of your property. This is particularly useful if you're struggling with cash flow but own a home or a piece of property. Secondly, it usually has lower interest rates compared to other types of loans, making it a more cost-effective borrowing option. Lastly, it often provides more flexible repayment terms. You have the choice of deciding the loan tenure, which can extend up to 15 years, making it possible to reduce the burden of hefty monthly installments.

The best way to secure a mortgage often involves several steps such as: having a good credit score as lenders look at credit history to make a decision; saving for a sizeable deposit as the bigger your deposit, the lower your loan to value ratio will be; maintaining a steady income as lenders need assurance that you can make your mortgage repayments; doing your research to identify the best mortgage plans and getting pre-approved; and consulting with a financial adviser or a mortgage broker to help guide you through the process.

A guarantee in a mortgage is a legal assurance given by a guarantor (a third part, usually a family member) to the lender that the loan obligations will be fulfilled. It serves as a kind of safety net for the lender, allowing them to reclaim the debt from the guarantor in case the borrower defaults on the mortgage repayment.

A mortgage loan operates in a way where a financial institution lends you money to buy real estate, which could be a house, a flat, or a plot of land. This loan is secured against the property that you buy. You are obligated to pay back the loan in regular instalments over a predetermined period, generally spanning several years. The repayment includes the principal amount and the interest accrued.

Any individual who meets the eligibility criteria set by the lender can apply for a mortgage online. Generally, eligibility includes being a resident or citizen, having a steady income source, a good credit score, an age requirement usually between 18 years to 85 years and a reliable debt-to-income ratio. It is always advisable to refer to your lender's specific criteria to ensure eligibility.

A high CIBIL score is not a strict requirement for obtaining a mortgage loan, but it significantly influences the approval process. Lenders prefer applicants with a score of 750 or higher, as this indicates a reliable credit history and responsible financial behaviour. A higher score can lead to better interest rates and favourable loan terms. Conversely, if your CIBIL score is lower, you may still secure a loan, but you might face higher interest rates, stricter terms, or a reduced loan amount. It is advisable to check your score before applying and take steps to improve it if necessary.

Yes, income proof is a critical requirement when applying for a mortgage loan. Lenders need to verify your income to ensure you can comfortably repay the loan. Acceptable forms of income proof include salary slips, bank statements, and Income Tax Returns for salaried individuals. Self-employed applicants may need to provide profit and loss statements, balance sheets, or tax returns to establish their income stability. The lender typically assesses your income against your monthly obligations to calculate your debt-to-income ratio, which helps determine the loan amount you can afford and influences the approval decision.

Several factors influence mortgage loan approval, including your credit score, income level, and overall financial stability. A higher credit score indicates responsible borrowing behaviour, making you a more attractive candidate. Lenders assess your income to determine your repayment capacity, usually preferring a steady employment history. The debt-to-income ratio is also crucial; it compares your total monthly debts to your gross monthly income, with a lower ratio indicating a better capacity to manage additional debt. Additionally, the property's value is assessed, and lenders consider your age, which can affect the length of the loan term.

Paying off your mortgage loan early is generally possible, but it is essential to review your loan agreement for any associated prepayment penalties. Many lenders impose these fees as compensation for lost interest income when borrowers pay off loans ahead of schedule. However, some lenders offer flexible terms that allow for early repayment without penalties, particularly if the loan is structured as a fixed-rate mortgage. If you are considering early repayment, it is a good idea to consult your lender for clarification on any penalties and weigh the benefits against the costs to make an informed decision.

The amount you can borrow with a mortgage loan typically depends on various factors, including your income, credit score, and the property's value. Lenders usually offer a loan amount that ranges from 60% to 75% of the property's market value, but this percentage can vary based on the lender's policies and your financial profile. Your debt-to-income ratio is also a critical factor; a lower ratio indicates you can comfortably manage additional debt. It is advisable to calculate your financial situation before applying to get a clearer idea of the loan amount you might qualify for and ensure it aligns with your needs.

The mortgage loan application process typically takes between 7 to 15 business days from the initial application submission to loan approval. However, the duration can vary based on several factors, including the lender’s processing speed, the completeness of your documentation, and the time taken for property verification. Factors like the type of mortgage, current market conditions, and the lender's workload may also influence the timeline. To expedite the process, ensure that all required documents are submitted promptly and that you respond quickly to any requests for additional information from the lender.