You can always come across unforeseen expenses such as medical expenses, property renovation, education fees or even marriage expenses. At that time, your savings may not be enough to fulfil your requirements and there are other ways of gathering funds that may be unpleasant like borrowing from your family or friends but there is a self-sufficient method of acquiring funds with the help of your property this is known as a mortgage loan or a loan against property.

A loan against property is a secured loan which you can acquire by pledging your immovable assets such as your commercial or residential property as collateral with a bank or a lender to secure a large sum of financing at economical interest rates and a long-term tenor. The loan is repaid in the form of monthly instalments (EMIs) which includes the interest and the principal component of the loan.

Over the years the process of applying for a mortgage loan has become relatively simple and straightforward. Here is the process of applying for a mortgage loan:

1. Approaching the lender:

Before applying for a mortgage loan it is in your best interest to visit multiple lenders to establish the best possible offers for your property. Each lender has its own lending terms, interest rates, loan tenors, EMI schedules, and loan charges so it is best to compare each lender to make the best possible choice.

You will have to meet a certain set of criteria required by the lender such as:

  • Applicants Age
  • Applicant’s Monthly Income
  • Job Profile
  • Any existing debts
  • Property documents

2. Applying for the loan:

Proceed to visit the lender’s website to download the mortgage loan application form and fill in the relevant details required in the form such as name, date of birth, the reason for loan, property details, occupation, job status, age and other details. You may submit the application form on the website itself.

3. Documentation:

Along with the application form, you will need to submit a set of documents as well that the lender will require for verification purposes. These documents will differ on the basis of your employment status.

In the case of a salaried employee you will need to submit the following:

  • Application form along with a photograph of the applicant
  • Photo ID proof such as Aadhaar Card, Passport, Driving License
  • Proof of current residence such as electricity bill, property tax receipt, or any other utility bill
  • Salary slip for the past 6 months
  • Banking statements for the past 6 months
  • Form 16
  • A cheque with the processing fee amount
  • Documents for the property that is to be mortgaged such as title deed, registration certificate, sale deed etc.

In the case of a self-employed individual, you will need to submit the following:

  • Application form along with a photograph of the applicant
  • Photo ID proof such as Aadhaar Card, Passport, Driving License
  • Proof of current residence such as electricity bill, property tax receipt, or any other utility bill
  • Proof of business such as Memorandum of Association, Company PAN Card, GST Certificate, Article of Association and Corporate Identification Number
  • In the case of a professional, you will need to submit your qualification certificates.
  • IT returns of the company and the individual for the past 3 years
  • Balance sheet and Profile and Loss statements for the past 3 years
  • Business profile
  • Banking statements for the past 6 months
  • A cheque with the processing fee amount
  • Documents for the property that is to be mortgaged such as title deed, registration certificate, sale deed etc.

4. Evaluation of Documents and Application:

Upon submitting these documents, the lender will conduct a thorough inspection of your documents for verification purposes. During this process your CIBIL score will be evaluated as well to understand your financial capability and if you have defaulted on loans in the past. It is important that you submit all the documents because missing out of documents will delay the verification process and you will be required to resubmit the missing documents which will lead to further delay in the approval of your loan.

5. Property Inspection:

By this point, the lender has deemed you financially capable of a mortgage loan and is willing to offer you a loan but to obtain the loan sanction amount they will need to conduct a property inspection to verify the loan-to-value (LTV) ratio of the property as per its current market value. A residential property that is new and located in the suburbs and is well maintained will help increase the LTV ratio as the property’s resale value will be higher. A higher LTV will offer you a large loan sanction amount and favourable lending terms. Lenders will usually sanction anywhere between 60-70% of the property’s current market value.

6. Processing the loan:

Once the inspection is done the lender will make you an offer for your property which includes the loan principal amount, the interest rate offered, EMI that needs to be paid and the loan tenor. It is imperative that you go through the mortgage loan terms and conditions to get a complete understanding. Upon accepting the lender’s terms and conditions the loan amount will be disbursed within 72 hours.

In conclusion, each lender operates on its own differentiating lending terms such as interest rates, tenors, LTV ratio section amount, processing fees, foreclosure charges and other factors. You must apply to multiple lenders to receive the best possible mortgage loan offer.