Loans offered by Indian Non-Banking Financial Service institutions are as varied as the needs of Indians. You can get loans for fulfilling all your dreams and desires at attractive interest rates. Whatever your need is, be sure that there is a loan to cater exclusively to your needs.
However, the best of the lot is the loan against property or mortgage loan. A mortgage loan combines the best features of the various types of loans available with Indian NBFCs.
This article is the ‘all-you-need-to-know’ guide to loan against property that aims to make you an expert in saving money with property loans. Scroll down to read the top-8 tips you need to extract the maximum value out of your loan against property.
- Assess Your Ability to Repay
Applying for a loan against property is secure. Fast loan approval makes the process of getting money easier. Spending the amount is the most natural thing you can do. But what if this loan is in addition to some other loan whose EMI you are paying every month?
Since the repayment tenure of a property loan is higher than many other loans, you should consider your stability of income as a key deciding factor.
- Check Your Requirements
Since a mortgage loan makes it easy to get up to 70 per cent of the market value of the borrower’s property, many people take a higher amount than they need or can repay.
Evaluate your needs and apply for an amount you will require and avoid what you might expect. Overindulgence can do more harm than good.
- Keep the Repayment Window Small
The repayment tenor of a loan against property may extend up to 15 years. However, a higher duration means a higher interest amount. It is better to assess your repayment capacity, stretch it a little further, and repay within 5-10 years. This way, you can save up a lot of money.
- Tap the Benefits of an Overdraft Facility
How good would it be if you apply for a loan against property, utilise just the right amount you need at one time, and pay interest only for the amount you have withdrawn. It would serve as a line of credit, which can supply you with funds whenever the need arises. Thankfully, the overdraft feature of a property loan makes it possible for you to withdraw the amount you need without having to pay interest for the entire amount. Another advantage of an overdraft is that you do not need to pay fixed monthly installments. Instead, pay interests only when you withdraw money.
The overdraft facility is an excellent way to budget your loan.
- Save Your Taxes With a Loan Against Property
A mortgage loan allows you to save taxes on the interest payable, under the provisions of Section 37(1) and 24(B) of the Income Tax Act.
Section 37(1) is applicable if you use the funds for business purposes. If, however, you use the funds to purchase a property, then you can apply for tax deductions under Section 24(B).
It is good to know that you cannot claim tax deductions on using the funds to sponsor wedding, vacation, education, or medical emergency.
Check with your financial planner the documents required to avail of tax benefits you are eligible to get if you apply for a loan against property.
- Never Apply for a Mortgage Loan With a Fixed Interest Rate Structure
Always apply for a loan against property that follows the ‘reducing balance’ interest rate structure. It would keep on reducing your EMI outflow as you continue to pay the EMIs. The reducing-rate structure is an excellent way to save money while paying the interest of a mortgage loan.
- Avail the Balance Transfer Facility to Save Money
Like Mobile Number Portability, where you can change your mobile service provider, it is possible to change your lender to capture the benefits of a low rate of interest and flexible terms. However, for this, you should have a good CIBIL score and repay EMIs within the due dates.
- Be Ready With the Documents Required to Apply For a Loan Against Property
The loan against property documents required are much simpler than many other loans. Apply for a mortgage loan with the following documents:
- Application form and photograph
- Proof of Identity
- Address Proof
- Age proof
- Bank Statement or 6-months salary slips
- Form 16
- 3-years Income Tax Returns
- Processing fee cheque
- Property documents
Getting a loan against property is secure. Selecting the right lender is tough. Select a reputed lender to get benefits like digital processing of the loan, minimal documentation, extensive branch network, flexible repayment terms, competitive rates of interest, and friendly customer service.