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What is a mortgage loan and what are its advantages?

Mortgage Loan: What Are The Advantages Of Taking This Loan?

A mortgage loan refers to a loan granted by a bank/NBFC/financial agency /a lender to any person against his/her property through a legal contract. The property can be a house, a plot of land, or a commercial or personal real estate that is registered in that particular individual’s name. 

Since the loan is secured against a property the bank/lender does not have to worry about losing their money if the individual fails to repay the loan amount. The property can be sold by the lender/bank to clear off the existing debts. 

A mortgage loan can also be taken against a newly bought property to pay off the cost of the property. This is referred to as liens against the property.

The Purposes For A Mortgage Loan

A mortgage loan can be taken for different purposes including:

  • Paying property costs
  • Construction of a home/building
  • Sending children abroad for higher studies
  • Funding huge medical expenses
  • To meet the expenses of a marriage
  • Starting/ expanding a business
  • Buying a vehicle

You can also consider taking a loan against gold to meet the above needs if you have gold in the form of jewelry or coins with you. However, gold loans wouldn’t be sufficient enough to meet the entire costs and the gold loan interest rates could also be comparatively higher.

What Kind Of Properties Can Be Mortgaged?

You can consider almost all kind of real estate (in your name) for a mortgage loan including –

  • A piece of land 
  • Commercial property
  • Industrial property
  • Your home
  • A home that you’ve rented out
  • A property that’s under construction

Maximum Loan Amount And Interest Rate On A Mortgage Loan

On average most of the banks, NBFCs, and financial lenders give around 50%-60% of the property value as a mortgage loan. The loan amount could go up to 75% of the total value of your property if the property has a good appreciation. However, not all banks provide that amount.

On average, the interest rates on mortgage loans could be anywhere between 12% and 15% of the loan amount. This makes it one of the most affordable among every loan. The maximum loan tenure for a mortgage loan is 15 years in general. This could also vary depending on the bank you’ve chosen. Given below are the interest rates on mortgage loans offered by some of the major banks in India.

Bank
Rate Of InterestLoan Value/Amount
SBIStarts at 10%Maximum of Rs.7.5 Crore
Axis BankStarting at 11%Maximum of Rs.5 Crore
ICICIFloating Rate starts at 10.20% and fixed rate at 11.95%Maximum of Rs.5 Crore
Canara BankStarts at 11.65%Maximum of 50% of the value of the mortgaged property
Punjab National BankStarting at 10.50%Maximum of 60% of the value of the mortgaged property
HDFC Starting at 9.65%Maximum of 60% of the value of the mortgaged property
Federal BankStarting at 11.90%Maximum of Rs.5 Crore
Union BankStarting at 11.50%Maximum of Rs.10 Crore

Advantages Of A Mortgage Loan

The following are some of the major advantages of taking a mortgage loan.

  • Helps to increase the buying capacity of people (The cost of property are increasing by the day making it impossible for people to buy a house or land)
  • With a good loan tenure, repayment is much easier
  • Increases credit score rating
  • Cost-effective compared to other loans
  • Income Tax benefits

The mortgage loan has to be repaid with the interest rate and other charges prescribed by the bank or financial agency. The contract ends once the loan has been repaid completely.

This blog is maintained by the Finaura team. Finaura is a solution that will help you find the best gold loan solution from gold loan company nearest to you. If you have any queries please feel free to contact us. Call us on +91 484 2388285 or email us at [email protected]

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