• Easy to get: LAP is a secured loan making it easier for lenders to offer money to the borrower as it is backed by collateral.
• Longer tenure: Usually banks sanction a LAP between Rs. 3 Lakhs to Rs. 100 Crores. It is the only loan facility other than the Housing Loan that allows banks to stipulate repayment period of up to 20 years.
• Lower interest rate: In comparison to Personal Loans, a LAP loan has a lower rate of interest. The reason is the security offered to the banks.
• Lower EMI: When you have longer tenure and a lower interest rate, the EMIs are bound to be lower.
• Flexibility: Various banks have flexible loan products in this category, including term loans, overdraft facilities, reverse mortgage, etc.
• Types: LAP can have various types, such as loan against residential/commercial property, loan against rent receivables, reverse mortgage, and so on.
• Tax benefits: You get benefits tax benefits if you avail a loan against property for home renovation purposes. Usually, customers go for home renovation loans if they have to carry out repairs to the same property to be mortgaged to the bank. You might carry out repairs to your home but avail a mortgage loan by mortgaging another property. Under such circumstances, you have to prove that the end use of the loan is for carrying out renovations to the property you reside in.

Each lender has their own eligibility criteria for availing LAP. Below are some common criteria to be eligible for a mortgage loan: 

• Age: Minimum 21 years and maximum 65 years.
• Profession: Both self-employed individuals and salaried persons with a regular source of income are eligible for a Loan Against Property.
• Joint applications: Co-applicants are permissible. Lenders can accept the income of the co-applicants for arriving at the eligibility.
• Ownership: 
  • The applicant should have unencumbered property in their name. The property can be residential, commercial, or industrial. 
  • Agricultural land is not acceptable as security for the loan. 
  • Many banks stipulate that the property should either be vacant or self-occupied. 
  • Some of the banks do not consider a property that is let out on rent or lease to third parties. 
  • Some lending institutions sanction loan against vacant residential plots
• Margin: The margin requirement for Loan Against Property can be 10% to 50% of the market value of the property.
• Current obligations: The take-home pay norms come into effect. Usually, one should have a take-home pay of 50% after accounting for all the EMIs including the proposed one for the Loan against Property. Hence, it is imperative for the borrowers to declare their current obligations.
• Credit history: The lending banks are members of CIBIL (Credit Information Bureau (India) Limited). They can pull out the records from CIBIL to determine your credit score. Usually, a credit score in the range of 600 and above is acceptable.

• Upfront fees: Many banks follow the procedure of collecting upfront fees for processing the application. They adjust the fees with the processing fee in case they approve the loan. Remember, this is a non-refundable fee. It is usually in the range of Rs. 3,000 to Rs. 5,000.
• Processing fees: The regular processing fees are in the range of 0.50-1.00%.
• Valuation charges: Normally, these charges are included in the processing fees. But, some banks charge it as a separate entity. These charges are payable to the valuation engineer who determines the value of the property and submits the valuation report to the bank.
• Legal scrutiny charges: Similar to the valuation charges, some banks include these charges in the processing fees. At times, you have to incur these charges separately. It is payable to the advocate who conducts the legal search of the property and submits the Legal Scrutiny Report.
• Mortgage registration charges: Some states in India do not require the registration of the equitable mortgage. It is compulsory in states like Tamil Nadu. You have to incur these charges (0.5% of the loan amount subject to a maximum of Rs. 25,000 as stamp duty and  Rs. 5,100 as equitable mortgage registration charges).
• Prepayment charges: Some banks charge prepayment charges to the tune of 2% to 5% of the outstanding loan It depends from bank to bank.
• Insurance: Insurance of the property to be mortgaged to the bank is compulsory. Also, some banks have tie-ups with insurance companies who market their products like loan insurance, health insurance, and personal accident coverage. These are optional charges.

• Visit the official website of the lender to fill in the online loan application form or fill it instantly through our website.
• On completion of this mortgage loan process, you will be able to choose the offer that suits your requirements. You should keep your application form and documents ready. We have a special team to assist you in this regard at no extra cost.
• The lender has the responsibility of verifying the KYC and income proof documents. The lender would like to inspect the property and have a discussion with the borrower to obtain first-hand information about the borrower’s employment, business, income, and investments.
• Banks have advocates on their panel to carry out a legal search for the last 30 years to ensure the property is free from any encumbrances and that the borrower has the clear title to it. It is a prerequisite for the equitable mortgage to be valid and binding on the borrower.
• The evaluation of the property is the next step following which the banks appraise the loan application for the eligibility amount.
• On the approval of the loan, the bank sends you the sanction letter that you have to go through and agree to the terms and conditions. MyMoneyMantra helps you in this regard.
• Finally, you have to execute the equitable mortgage and register it (if registration is compulsory – It is not so in some states).
• We help you with the disbursement process as well.

Types of loan against property can be classified based on the purpose for which you avail the loan.

• Business Expansion Loans: Business entities can avail this facility for acquiring new machinery, purchase of plant, meeting working capital requirements, and invest in new technology or business. The lending banks require collateral in the form of property, residential, commercial, or industrial. Depending on the nature of the property available as collateral, the lending banks calculate the loan eligibility. For commercial properties, the LTV is around 55- 65%. In the case of industrial properties, the LTV reduces to 40-55% whereas the LTV in the case of residential property is in the range of 65-70%.
• Working Capital Overdraft Facility: Banks sanction overdraft facilities against the property for meeting the day-to-day working capital requirements. Under such circumstances, the property is accepted as collateral. Lending banks estimate the amount of finance required based on the following figures:
  • Property value and nature of the property
  • Actual working capital requirement calculated as per the internal policies of the bank, usually the Projected Annual Turnover method.
• Personal Expenses: Individuals can also avail Loan against the Property for personal expenses such as medical expenses, educational expenses, marriages, travel, as well as for purchasing consumer durables.
• Home Renovation: Usually, people do not avail this loan for renovating homes as there are separate schemes available at comparatively lower LAP interest rates. However, there can be circumstances when the borrower might have to resort to avail a Loan against Property for home renovation.
• Lease Rental Discounting: Some banks offer loans against the future rent receivables, especially in metropolitan and urban areas. One should note that the property that fetches the rent should also be mortgaged in favour of the bank. Banks usually finance in the range of 75% to 90% of the future lease/rent receivables. The tenure of such loans is shorter and should end before the expiry of the lease or the rental

Following are the documents required for mortgage loan:

The best part about loan against property is that you can prepay your loan before the end of the repayment tenure if you wish to. As per the RBI’s rules, this facility does not involve any prepayment charges if the loan is based on floating mortgage interest rates. For other variants, lenders may charge prepayment charges to the tune of 2% to 5% of the outstanding loan. It depends from bank to bank.

• Industrial properties, including factories, warehouses, and processing units.
• Commercial properties, including malls, complexes, shops, office buildings, and hotel buildings.
• Residential properties, including residential homes, apartments, flats, and individual houses.
• Schools, hospitals, cinema halls and other properties .
• It can also be provided against non-agricultural land.
• LAP is also offered against unbuilt/under-construction property if it falls under the list of approved builders of banks/ NBFCs.