Multiple banks. Different interest rates. Call it a "conflict of interest".
Multiple banks. Different interest rates. Call it a "conflict of interest".
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    Mortgage Loan

    What is a 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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    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.


    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

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