Loan Against Property (LAP), also known as mortgage loan, allows consumers to raise funds by leveraging their residential, commercial or industrial properties. Like unsecured personal loans, LAP can also be availed for meeting both personal and business needs other than speculative purposes. Banks and HFCs offer Loan Against Property for tenures of up to 20 years. The loan amount for LAP can go up to 75% of the property’s market value, depending on the lender and the credit profile of the borrowers. Many lenders also offer Lease Rental Discounting (LRD) facility, which allows consumers to avail loan by pledging the rental receipts of their tenants.
Lower interest rates:
The secured nature of the loan reduces lending risk of banks and NBFCs considerably, thereby, allowing them to offer the loan at lower interest rates.
No end use restrictions:
Loan proceeds can be used for any purpose such as for consolidating multiple high-interest debts, covering costs related to wedding, business expansion, etc.
Longer loan tenure:
Banks and NBFCs offer tenures of up to 20 years on Loan Against Property, resulting in more affordable EMIs.
Higher loan amount:
Lenders usually finance up to 70% of the property value, resulting in higher loan amounts.
Higher chances of loan approval:
The loan is backed by any underlying property, thus, reducing lending risk for banks/NBFCs and increasing borrowers’ odds of availing the loan.
Overdraft facility:
Borrowers can also avail overdraft facility on this loan, giving them higher liquidity at lower interest cost.
The eligibility criteria for availing LAP varies across lenders, below are some general conditions that must be fulfilled to apply for Loan Against Property:
Residential Status:
Resident Indian and Non-resident Indian.
Minimum Age Limit:
18 years
Maximum Age Limit:
70 years
Employment Type:
Salaried, Self-employed Professional and Self-employed Non-Professional
Minimum Salary:
At least Rs. 12,000 per month
Net Annual Income:
At least Rs. 1.5 lakh p.a.
Work Experience:
At least 1 year in the current organisation
LTV Ratio:
Up to 75% of property value
Credit Score:
Preferably 750 and above
Property Type:
Residential, Commercial and Industrial properties are eligible to be pledged as collateral. Lenders will also consider the age and condition of the property before accepting the property as collateral.
Proof of Identity :
(Passport/ Voter ID Card/ Driving License/ PAN Card)
Proof of Residence :
Ration card/ Telephone Bill/ Electricity Bill/ Rental Agreement/ Passport/ Bank Passbook or Statement/ Driving License)
Proof of Age :
(PAN Card/ Passport/ Any other certificate from a statutory authority)
Proof of Income for Salaried :
(Form 16, Latest Payslips, ITR of past 3 years and investment proofs (if any)
Proof of Income for Self Employed :
(Details of ITR of last 3 years, Balance Sheet and Profit & Loss Account Statement of the Company/Firm, Business License Details and Proof of Business Address)
Property-related Documents :
(Title Deeds including the previous chain of the property documents, Nil Encumbrance Certificate on the concerned property, approved plan [if applicable])
Below are some of the general fees and charges that may be applicable to your mortgage loan.
| Processing Fees | 1% – 2% of loan amount |
|---|---|
| Part Prepayment Charges | (To be changed)Floating Rate: Nil Fixed Rate: Up to 4% on outstanding principal |
| Foreclosure Charges | Floating Rate: Nil Fixed Rate: Up to 2% on outstanding principal |
| Penal Interest | Usually at 24% p.a. (2% per month on the overdue installment/s) |
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A Loan Against Property involves securing financing by pledging a commercial or residential property. Borrowers can utilize the loan proceeds for various purposes except speculative activities.
The optimal bank/HFC for a Loan Against Property typically offers the lowest interest rates, thereby minimizing overall interest costs. However, borrowers should also consider factors such as loan tenure, LTV ratio, processing fees, pre-payment charges (for fixed rate LAPs), and loan disbursal time.
Borrowers secure financing from a bank/NBFC/HFC by pledging their property as collateral and repay it over the loan tenure. Defaulting on payments could result in foreclosure of the pledged property, similar to other secured loans.
Generally, Loan Against Property tenures extend up to 20 years, although this may vary among lenders.
Eligibility for a Loan Against Property depends on factors such as age, property details, repayment capacity, credit score, and occupation profile.
Benefits include lower interest rates compared to unsecured loans, flexible usage of loan proceeds, extended loan tenures up to 20 years, higher loan amounts (up to 70% of property value), increased chances of approval due to security, availability of overdraft facility, and debt consolidation at lower interest rates.
A co-applicant is required only if the mortgaged property is jointly owned. In such cases, all property co-owners must apply as co-applicants.
Lenders typically accept residential, commercial, or industrial properties as collateral, subject to property condition and age.
Banks/HFCs usually offer repayment periods of up to 15 years, with some extending to 20 years or more.
Yes, several financial institutions provide Loan Against Property facilities to NRIs.
Loan Against Property allows individuals to raise funds by pledging their property, while a home loan facilitates the purchase, construction, extension, or renovation of residential property.
Defaulting on LAP EMIs results in late fees, penal interest, and a reduction in credit score. Failure to repay partially or fully within 90 days classifies the loan as a Non-Performing Asset (NPA), potentially leading to recovery actions under the SARFAESI Act, 2002.
