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    Mortgage Loan

    A mortgage loan is a debt instrument. Normally, people take mortgage loans to purchase property like home, land etc. A mortgage loan helps you raise money so that you can make up for your financial shortage and also purchase what you want. Mortgage loan is a Secured Loan. The loan is secured on the borrower's property. Going forward, the borrower needs to repay the loan as well as the interest amount on the loan within a particular period of time. Once the repayment is completely done, you will be able own the property on your name or get back your belongings. Mortgage loans are also known as or claims on property or liens against property. In case, you stop repaying your mortgage loan, the lender/bank has the complete right to possess and sell the secured property. A mortgage loan involves the following components - principal, interest, tax and insurance. Principal is the amount you actually borrow from your lender. Interest is the reward your lender receives for lending you the money. The interest rate plays a major role in increasing the size of your mortgage loan. Higher interest rates lead to higher mortgage payment. Tax and insurance payments are added to your monthly mortgage payments. Insurance provides you protection against future injuries that may be caused to your property. Also, your real estate taxes will be added to your monthly payments. The government will collect this tax on yearly basis and use that amount to fund various public and social sector activities. So, when you take a mortgage loan, you also need to understand the above mentioned components that affect the size of your mortgage repayments.

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    Understand the functioning of a mortgage loan

    When you borrow funds with your mortgage, that particular borrowed amount is known as the principal. You will be required to pay off the principal amount for your mortgage loan on a monthly basis. This is also known as the mortgage balance. Apart from this, you will have to pay your interest on the loan also. Your mortgage payment will include the principal amount and the interest amount.

    Your mortgage payment amounts will depend on the type of interest rate that you choose. The two forms of rates of interest include fixed interest rate and floating or variable interest rate. If you select a fixed interest rate, your payments will remain fixed throughout your loan tenure. On the other hand, if you choose a floating interest rate, your payments will depend on the changes in market rates and the benchmark rates.

    Types of mortgage

    The two main kinds of mortgage loans include:

    • Fixed-rate mortgage: As the name suggests, under this type of mortgage, the rate of interest will remain fixed or constant throughout the tenure of the mortgage loan. If you choose an annuity repayment type, your monthly payment amount will remain the same over the entire loan period. If you choose linear payback, your monthly payment will reduce over the months.
    • Adjustable-rate mortgage: This mortgage is also known as variable or floating rate mortgage. In this type, the rate of interest will remain the same for a certain duration. Soon, it will start to increase or decrease depending on a benchmark index.

    Amortisation in mortgage loans

    During the initial period of your mortgage loan, you will have to most likely pay a high interest amount on your mortgage loan. This is because your loan balance will be pretty high during this period. Therefore, your equated monthly installments (EMIs) will mainly consist of interest for the first few months. The principal amount will be low. With time, your interest amount will come down as the loan balance would have reduced by now. Hence, your EMI will soon mainly constitute the principal amount. This particular flow of your EMI payment distribution is known as amortisation. This is how amortisation works in mortgage loans.

    How is a mortgage loan helpful to borrowers?

    A mortgage loan is the best choice for high-value purchases. When you do not have sufficient funds to purchase an asset of high value, it makes perfect sense to apply for a mortgage. A mortgage will serve as your debt instrument that will assist you in bringing together funds for the purpose of buying high-value assets such as a house or real estate. Obtaining a mortgage is quite easy. If your credit score is good and if you meet the necessary eligibility criteria, you are good to go. Home ownership processes have become very easy over the years with the help of measures introduced for mortgage.

    Lenders face a high value of risk as a high amount is involved in such mortgage loans, and the lender is not sure if the borrower will pay back the loan completely. However, a borrower should remember that if he or she does not repay the mortgage on time, then your lender can legally foreclose or seize your residential property in order to cover the losses incurred by your lender. Lenders can hold auctions for such properties.

    Primary concepts or aspects of mortgage loans

    When you plan to apply for a mortgage loan, you should be aware of a few common concepts that are associated with mortgage loans:

    • Mortgage: This refers to the security interest belonging to the lender. This security interest will come with certain conditions and restrictions regarding the use of the property.
    • Property: This refers to the physical asset that will be purchased with the help of funds.
    • Lender: A lender refers to the bank or non-banking financial company (NBFC) that provides the mortgage.
    • Borrower: A borrower refers to the individual who is interested in buying the property with the help of the mortgage loan.
    • Interest: Interest is described as the charge that needs to be paid by the borrower for utilising the lender’s funds.
    • Foreclosure or repossession: This refers to an arrangement in which the lender has the right to foreclose or repossess the property if the borrower fails to repay the loan on time. The lender is legally authorised to take back the property and sell it through an auction in order to cover the losses incurred due to defaulted payments.
    • Principal: This refers to the original loan amount that is borrowed by the borrower to buy the property.
    • Completion: When the borrower completes the purchase or remortgage, it is known as completion of mortgage terms. Once the completion happens, the new mortgage formally begins.
    • Deposit: This refers to the amount of money that the borrower will have to pay in advance for purchasing a property with the help of a mortgage.

    Mortgage Loan Eligibility

    In order to get a mortgage loan, you need to fulfill certain minimum eligibility conditions. The following factors are considered while determining your eligibility for a mortgage loan:

    • Your total annual income.
    • Minimum age needs to be 21 years.
    • If have any existing liabilities.
    • Valuation of your property.
    • Number of dependents you have.
    • Your total work experience and experience in your current job.
    • Financial documents.
    • Both salaried and self-employed individuals are eligible to apply for mortgage loan.

    Documentation required for a Mortgage Loan

    The documents required for a salaried and self-employed individual differ slightly. A salaried individual needs to submit the following documents:

    • A filled loan application form.
    • A few passport size photographs.
    • Proof of identity. As proof of identity you can submit voter card, driving license, PAN card, passport, employee ID card etc.
    • Proof of address. Normally banks accept ration card, Aadhaar card, telephone bill, electricity bill, voter card and driving license as address proof.
    • Your latest salary slips.
    • Form 16 issued by your employer.
    • Bank statements of last 6 months
    • And a processing fee cheque.

    A self-employed needs to submit the following documents:

    • Application form.
    • Recent passport size photograph.
    • Identity proof.
    • Proof of business existence.
    • Proof of education qualifications.
    • Certified financial statement for the last 3 years.
    • Last 3 years income tax return certificate.
    • Last 3 years profit and loss (P&L) statement.
    • Last 6 months’ bank statement
    • Processing fee.

    Mortgage Loan Interest Rates

    There are different types of interest rate applicable for mortgage loans in India. The most common types of interest rates sought after by the borrowers include fixed rate mortgage (FRM) and flexible or adjustable rate mortgage (ARM). In a fixed rate mortgage loan, you need to pay the same and fixed rate of interest for the whole tenure of your loan. You cannot opt for any change in the interest rate on your mortgage loan determined by your lender/bank, even if the interest rate rises and falls in the course of your tenure. Your monthly principal and interest payment don’t change. A fixed rate mortgage loan normally continues for terms like 15 year, 20 years and 30 years. A fixed-rate mortgage is also known as traditional mortgage loan.

    On the other hand, a floating or adjustable rate mortgage loan is a kind of loan wherein the interest rate changes based on economic fluctuation. In a floating rate mortgage loan, the interest rate is fixed for an initial period. But, going forward, it changes based on economic condition and in relation to the prime lending rate of a bank. When the prime lending rate goes down, the interest rate on your mortgage loan will also go down. But, when the prime lending rate of your bank goes up, the interest rate on your mortgage will also rise. Thus, when the prime lending rate of a bank changes, the adjustable rate also changes. Many people opt for adjustable rate of interest when they decide to take a mortgage for a longer tenure.

    There is another type of mortgage called interest-only mortgage. In interest only mortgage, you need to pay only the interest amount on your borrowed amount towards repayment. But, at the end of loan tenure, you need to pay off the principal amount as well. With this option, your interest repayments remain constant throughout the term.

    Payment option ARMs is another type of mortgage you can opt for to pay off your mortgage loan. It helps you choose between different monthly repayment options such as an interest only repayment, a 15-year fully amortizing payment, a minimum payment etc.

    However, different banks charge different Interest rates on Mortgage Loans. And these interest rates are subject to change from time to time without giving prior notification to customers.

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    How to use Mortgage Loan calculator

    You can easily calculate your monthly mortgage payments with the help of a mortgage loan EMI calculator. It is very important to calculate what your mortgage payment will be and how much you can afford to pay given that you borrow a huge amount of sum as mortgage loan. But, before using the calculator, you need to know a few things about your mortgage loan which include – your loan tenure, rate of interest and processing fee. After that, the only thing you have to do is to put this information in the calculator. Immediately, the calculator will reveal your monthly EMI liability for your mortgage loan along with payment break-ups, total payable amount and your loan amortization schedule. BankBazaar, the one stop solution for all your financial needs, provides a unique mortgagee loan calculator by using which you can easily calculate your monthly repayments towards mortgage loan. Calculating and knowing your monthly EMIs for mortgage loan is important as it reduces your confusions by giving you a clear picture of how much money you will need monthly to pay off your loan. Also, you can get to know the optimum amount you can afford to take as mortgage loan. It also helps in planning your budget and setting your other financial targets.

    Mortgage Loan Process

    Being a debt instrument, you are bound to pay off your mortgage loan within a pre-determined period of time. Mortgage loans are normally taken by individuals and business entities for the purpose of buying and investing in real estate without paying the entire value of the purchase up front. But, if you fail to pay off your mortgage, the bank can foreclose or repossess your property. A mortgage loan is a long term debt designed to help you purchase your desired property.

    You get ample time to pay off your loan, as a mortgage loan is normally taken for a longer period. The major factors that influence the repayments process are the size and term of the loan. The size of a loan refers to the amount borrowed from your lender and the term denotes the tenure of loan within which it needs to be repaid. If you borrow a huge of money for a longer tenure, you can pay it off by paying smaller EMIs. Because longer tenure results in smaller monthly repayments. That’ s why many people choose tenures like 20 years and 30 years to pay off mortgage loans.

    Once you decide to take a mortgage loan and approach your bank, the bank representatives will help you in documentation. After submitting all required documents, bank will verify those documents, and upon successful verification of your documents, you bank will approve your mortgage loan.

    Normally, the followings steps involve in the whole process:

    • Collection of necessary documents for loan processing.
    • Credit appraisal by you bank.
    • Loan sanction after proper credit check and verification of information.
    • Sanction letter delivery at your doorstep along with a soft copy sent to your Email Id.
    • Request for disbursal.
    • Property documents collection by bank.
    • Documents are legally examined.
    • Upon successful verification, disbursement cheque is prepared and delivered.

    Features and Benefits of Loan Mortgage loan:

    A mortgage loan comes with the following attractive features and benefits:

    • It is a cost effective way of borrowing. Normally, you can take a mortgage loan for a longer duration and pay off your repayment by using smaller monthly EMIs.
    • Mortgage loans charge lower rates of interest on your borrowings than any other loans.
    • Mortgage loan is a secured loan. It is secured against your property. The bank or lender has the right to repossess your property if you can’t repay your loan.
    • A mortgage loan helps you buy your own house. You can afford to buy a home with the help of this loan and be the sole owner of your property once repayment is over.
    • You can get loans against under construction property, fully constructed property, freehold residential and commercial properties for:
    • Get loan for a longer tenure.
    • Repay your loan with a simple repayment process through monthly instalments. You can pay it off by paying smaller monthly EMIs.
    • Mortgage loans are offered at attractive interest rates.
    • Enjoy an easy and hassle free documentation process.
    • You can get a mortgage loan anywhere in India with integrated branch network provided by banks.
    • You can choose from a number of interest rates to pay off your loan. They include - floating rates, fixed interest rates, interest-only mortgage and Payment option ARMs.
    • Get access to a higher amount of funds.
    • Mortgage loan can be sectioned even before your select your property.
    • You can apply for it both online and offline and enjoy doorstep services.
    • Both residential and commercial properties are accepted as collateral for mortgage loan.
    • Funds received from a mortgage loans can be used for business as well as personal needs.
    • Self –employed individuals get customized loan options.

    Mortgage Loan FAQs

    Am I eligible to apply for a mortgage loan if I am a self-employed?

    Yes, you are eligible to apply for a mortgage loan even if you are a self-employed. Both salaried and self-employed individuals can opt for mortgage loans irrespective of their income.

    How much amount can I receive as mortgage loan?

    You can get up to 80% of the registered value of your property. However, it depends on your property type and its market value, and bank’s policy.

    Can I take a mortgage loan for any other purposes rather than buying a house?

    Yes, you can take mortgage loan for any purpose apart from purchasing a house. The amount received from mortgage loan can be used for a variety of personal and business related purposes.

    How many days does a bank take to disburse the amount taken as mortgage loan?

    A bank normally takes 7 to 10 working days to disburse the money after submission of all necessary documents.

    What are the repayment options available to pay off a mortgage loan?

    The easiest way to repay your mortgage loan is equated monthly installments (EMIs). Also, you can repay the same through post dated cheques (PDC) and electronic clearance system (ECS).

    Can I pre-close my mortgage loan before its predetermined date of closing?

    Yes, you can pre-close your mortgage loan by paying the entire amount along with a prepayment fee charged by your lender. Normally, banks charge a very nominal amount for pre-closure.

    News About Mortgage Loan

    • Teaser loans may be introduced again say SBI, but ICICI differs

      State Bank of India Chief said that they would like to re-introduce teaser loans which were shelved a few years ago due to flagged asset quality issues, but ICICI says that standard rates are better since the customer is aware of the uniform rates throughout the life of a loan. Teaser home loans were offered to customer at a fixed low rate of interest in the initial tenure of the loan, and was later amended to a higher rate of interest in floating nature for the remaining tenure of the loan.

      2nd November 2015

    Mortgage Loan Reviews

    • HDFC Bank Personal Loan
      "Satisfactory"
      0.5 4.0/5 "Great!"
      I have taken my personal loan was taken with HDFC Bank 2.5 years back. The loan amount was 1 lakh.The interest rate was quite satisfactory and the tenure period was 2 years .I am happy with the service and responses . There is no inconvenience faced and the pre closure is after 2 years .
      Was this review helpful? 2
      , new delhi
      Reviewed on Sep 21, 2018
    • HDFC Bank Personal Loan
      "Satisfactory"
      0.5 4.0/5 "Great!"
      I have taken a personal loan with HDFC Bank and the process of documentation process was very good. I got the loan on time and the rate of interest and processing charges is nominal and in all there are no issues to get the loan. A smooth process in all.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Sep 21, 2018
    • ICICI Bank Personal Loan
      "Satisfactory"
      0.5 4.0/5 "Great!"
      My personal loan was taken with ICICI bank 1 year back. I have taken 2.8 lakhs and the interest rate was very high . The tenure period was 4 years but i did pre closure . The chargers re very high for pre closuring the loan here but i had a smooth loan process . The documentation was quite smooth and hassle free.
      Was this review helpful? 3
      , bangalore
      Reviewed on Sep 20, 2018
    • HDFC Bank Personal Loan
      "Very good"
      0.5 4.5/5 "Excellent!"
      I have taken my personal loan with HDFC bank 1 year ba4ck. The loan amount was 4,25,000 and the interest rate was average The tenure period was 2 years . I had a good satisfactory experience . They have sanctioned the loan with the committed time also. There are no difficulties faced .
      Was this review helpful? 1
      , bangalore
      Reviewed on Sep 20, 2018
    • ICICI Bank Personal Loan
      "Process is nice"
      0.5 5.0/5 "Blown Away!"
      ICICI Bank has also offered me a personal loan. The customer services and response is good and there are no hassles in the process. They also offered me a good rate of interest and the processing charges are nominal too. The after loan services are good too.
      Was this review helpful? 1
      , jaipur
      Reviewed on Sep 20, 2018
    • Capital First Personal Loan
      "Hassle free process"
      0.5 4.0/5 "Great!"
      I have taken a personal loan with Capital first. The customer services and response is good. The process to get the loan is good and the rate of interest and processing charges is normal too. The after loan services are also satisfactory. Good overall.
      Was this review helpful? 2
      , greater noida
      Reviewed on Sep 20, 2018
    • HDFC Bank Personal Loan
      "Very good"
      0.5 5.0/5 "Blown Away!"
      My personal loan was taken with HDFC bank 1 year back. I have taken 2.5 lakhs and the interest rate was satisfactory . I am happy with the customer service and responses. There is no inconvenience faced and the process was completely hassle free.
      Was this review helpful? 2
      , chennai
      Reviewed on Sep 20, 2018
    • Citibank Personal Loan
      "Satisfactory"
      0.5 3.5/5 "Pretty good"
      My personal loan was taken with CITI bank 4 months back. The loan amount was 1,20,000 and the interest rate was very high . The customer service and responses was good. I have faced some difficult and they even detected some amount also. The processing fee was nominal.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Sep 20, 2018
    • ICICI Bank Personal Loan
      "Very bad experience and still sufferring"
      0.5 0.5/5 "Unacceptable"
      Took BT and top up loan from icici in July 2018 but received DD for balance transfer in third week of August. When submitted the DD to the other bank it got rejected as authorised signature is missing on it. The sales manager is not answering my call. I have already raised the complaint with customer care after which I received the DD.
      Was this review helpful? 3
      , bangalore
      Reviewed on Sep 19, 2018
    • HDFC Bank Personal Loan
      "good service"
      0.5 5.0/5 "Blown Away!"
      My jumbo loan was taken with HDFC BANK , the tenure period is 2year . They charge 15% of interest rate and it is too high. There is no processing fee with this bank and the best part they gave preclosere option . The service and process was good and smooth with this bank .
      Was this review helpful? 2
      , hyderabad
      Reviewed on Sep 19, 2018
    • Bank Bazaar Personal Loan
      "Normal Service"
      0.5 4.0/5 "Great!"
      I've been using the BankBazaar platform for a while. I have applied for a short term loan via BankBazaar. It was good, customer support support was good. BankBazaar is a convenient platform for comparing and choosing various financial products online.
      Was this review helpful? 2
      , faridabad
      Reviewed on Sep 19, 2018
    • Cashe Personal Loan
      "Awesome Service"
      0.5 5.0/5 "Blown Away!"
      I have taken a short term loan from the CashE. It was awesome, I got the loan on the same day with in hours. It was a very good experience and they processed the application very quick. It is a very good service for emergency financial aid.
      Was this review helpful? 2
      , faridabad
      Reviewed on Sep 19, 2018
    • HDFC Bank Personal Loan
      "good service"
      0.5 5.0/5 "Blown Away!"
      My jumbo loan was taken with HDFC BANK , their tenure period is 4year . The best part is processing fee is free with this bank and rate of interest is 1.3% which is nominal in the market . There is option preclosere with 3% on principal amount . Overall it is good to have HDFC BANK.
      Was this review helpful? 2
      , pune
      Reviewed on Sep 19, 2018
    • Aditya Birla Finance Personal Loan
      "Very Bad Experience with ABFL"
      0.5 0.5/5 "Unacceptable"
      1. Fake commitment of 30 min. disb. 2. Irritate by sending lots of sms and emails of remainder. 3. Breaks privacy by sending bank details in sms and email. 4. No reply from customer care email. 5. After regular payment we will get an overdue emi sms.
      Was this review helpful? 0
      , pune
      Reviewed on Sep 19, 2018
    • SBI Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a personal loan with SBI and my loan experience was very good. The process was smooth and i received my loan amount on time. Customer service is good and they responded on time. The tenure period for this personal loan is 5 years.
      Was this review helpful? 3
      , secunderabad
      Reviewed on Sep 19, 2018
    • HDFC Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a personal loan with HDFC bank and my experience was good, the loan amount was for Rs 1 lacs with nominal interest rate of 11.5%. Customer service was good with this bank and they followed up on time and the tenure period for this loan is 2 years.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Sep 19, 2018
    • HDFC Bank Personal Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been a very good experience i had with this personal loan and the loan amount which they had provided also had been satisfactory as well. The interest rate with them has been nominal when compared with the market rate. Their customer support also had been responsive where they had been helpful at times.
      Was this review helpful? 1
      , chennai
      Reviewed on Sep 19, 2018
    • Bank Bazaar Personal Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been a very good experience i had with Bank Bazaar and i had been using it for checking about the credit scores and the interest rate as well. I had been using the website of them and it has been easy in using it. Their customer support also had been responsive where there has been good follow up during the process of my personal loan.
      Was this review helpful? 2
      , chennai
      Reviewed on Sep 19, 2018
    • ICICI Bank Personal Loan
      "Very Good Service"
      0.5 5.0/5 "Blown Away!"
      I had chosen to go with them since one of my friend had suggested me about them. The process in getting this loan has been smooth and easy and the loan amount which they had provided also had been satisfactory. The interest rate with them has been nominal when compared with the market rate. Their customer support with them also had been responsive.
      Was this review helpful? 2
      , chennai
      Reviewed on Sep 19, 2018
    • Kotak Personal Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      The experience i had in getting this personal loan has been okay, where the loan amount which they had provided had been sufficient and the interest rate with them also had been nominal. Their customer support also had been helpful at times and has been responsive. There has not been any hassle faced with them so far.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Sep 19, 2018
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