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Who can take a property loan?

by Nathan Zachary
property loan

There are situations in life when you have to take on an expense that you are ill- prepared for. You may be willing to draw out your savings even if it is not the best idea but there may be expenditures that are not covered even by your entire savings. In such cases what can you do? Taking a loan can be an expensive affair that you cannot opt for but a property loan is still a viable option. But are you eligible for one and is this the right loan for you? Learn more right here.

What is a property loan?

Borrowers often get confused between home loans and loan against property. The loan against property is a loan that is secured by your house. It has the house as collateral that will be taken over by the lender if you default on the repayment of the loan. Since the loan is secured by the collateral, the amount that you can avail of as loan hinges upon the value of the collateral too. As long as the loan remains unpaid, that is, during the term or tenure of the loan, the property has a lien over it that is held by the lender. If you fail to repay, he can sell the property and use the proceeds to make good the loan.

Can you take a mortgage or property loan?

Before you think any further about mortgage loans to address your financial need, you must know if you can take one. Here are some factors to know:

  • The first thing is that you must have property in your own name that is valuable enough to function as a collateral for the kind of loan you seek. Needless to say, you cannot place rental property or property in someone else’s name as your security for loan. The lender will ask for documents to carry out the verification of this aspect.
  • Lenders ensure that only those with the maturity to understand the implications of a loan can avail of these products. There are age limits that apply for mortgage loans and typically, you can apply for a loan if you are 23 years of age. In general, the lender also insists that the loan tenure ends before you reach your 60th year to ensure that your EMI payments are done during your working/ productive years.
  • Your eligibility also hinges on your ability to repay the loan. Use a loan against property calculator to find out how much the loan you need will cost you in terms of monthly EMIs. Evaluate if you can afford this sum as a regular outgo for months on end. Your lender will check your eligibility on this aspect by checking your income records. If you can show a regular source of reasonable income that covers your EMIs, then there is a greater chance that you can avail of such a loan. Usually, lenders ask for salary slips as well as IT returns for the previous financial year accompanied by bank statements. 
  • How much debt do you already hold? If you have existing debts that are already taking away most of your monthly income, you may not be able to afford a new one. A debt to income ratio of more than 50% gives you a good chance of being able to take this loan. To figure out your total debt, take into consideration any loans you have outstanding, your credit card debts and other EMI payments that are ongoing. All of these count towards your overall debt. If your debt to income is not impressive, then try to pay off some long standing loans to bring the ratio to a more favourable level.
  • Your credit score is another important measure of your ability to repay the mortgage loan and hence a tool to measure if you can avail of one. A high credit score, that is, over 750, is an indicator that you are financially healthy and also that you can fulfil financial responsibilities diligently. This is a very important measure for every lender who is evaluating your loan application. When you use your loan against property calculator to find out the EMIs you will be paying, also download your credit report and check it for accuracy.

If you think you match all these criteria, then start searching for your mortgage loan product today by browsing different lenders’ sites. Compare terms and conditions to ensure that you get the best loan options available. It is also imperative for you to use the loan against property calculator to check how each loan’s EMIs work out. This gives you a clear picture of the obligation you take on when you sign up for the property loan. Once you have assured yourselfthat you can manage the loan comfortably, you are ready to apply online to a reputed, reliable lender with the relevant documents to start the processing of your loan.

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