Taking out a loan from the bank is both good and bad. But if you are taking out a loan against property, you need to be sure. Due to one mistake your whole life can flip upside down and the cost is huge. You may also lose the property in the worst case scenario. But it is not always the case. Many people change their fortunes with these types of loans. Therefore, there is no need to be negative. You can look at the brighter side and be careful at the same time. In this article we will tell you why and why you should not go for a loan against a house or any other property. Let us start with the definition of property loan.
What is a loan against property?
All of us feel the need for some extra money at some point in time. Imagine a situation where you need money and the credit score is poor. There are many conditions that can become reasons for loan rejection. This is the time when your property, like a house, comes for rescue. Taking a loan against your house comes under the secured loan category. In most cases, the interest rates are also higher than a home loan. If you want to borrow money against house, this article is for you.
Before you decide about the loan against house deed
Before taking a loan from a bank, you should know the reason for taking a loan against property. This will give you clarity over many factors. According to these factors you can make a strategy. Similarly, consider your current money requirement, growth and re-payment plan. You may lose the job due to any unexpected situation. Therefore, planning is very important. Research about mortgage loan interest rate. Bargain for the lowest interest rates. Even less than one percent matters a lot in the long run.
Mortgage loan interest rate
Mortgage loan interest rates keep on changing. Largely due to the present economic conditions of any country. But this is not the only factor that affects the loan against property interest rates. Your personal credit score and paying capacity also matters a lot. Sometimes when you are borrowing against inherited property you do not realize. This is because you may not value the property as your parents did. But at the end of the day, banks ask you for the repayment with interest. Think about your profit because banks are also concerned about their profit.
Loan against property eligibility
There is no standard criteria for eligibility because banks take the final decision. There is no guarantee. However, all banks do these things in common before approving any loan against property.
First of all, banks ask you to submit documents related to identity proof and address proof. The objective is to ensure that the loan applicant is not a fake person. Before property loan approval, financial institutions want to make sure the money is going to the right person.
Credit Score Check
Banks also check credit score and payment history. Due to this, their motive is to check your previous loan repayment pattern. If you make your payments on time the loan approval process will be hast.
If you are borrowing money against your home then the first thing banks ask you is registration documents. You will have to submit the property documents. Banks verify if the property documents are authentic. They take help from the concerned authority or department for property verification. In addition they also confirm if there is any more existing loan on this property.
If all the documents presented by you are genuine this is probably the second last step. Property is valued based on the current market value. First of all banks consider the government defined circle rates or the value of the property. There are some other market related factors impacting property resale value. Due to this, the rates keep fluctuating. As a result, banks do not give 100 percent of the property value as a loan. The maximum loan they approve is around 60-65 percent.
The idea is to make sure that they are giving loans to the right person. The property is genuine and you will be able to repay on time. After this you can expect a loan against land or a house.
Is borrowing against your house a good idea?
The answer depends on your financial requirements and the payback time. For example: you are in dire need of funds and borrow against the house. If you are unable to pay back on time, banks can sell the house to recover the loan. This will only increase your trouble. As per my personal experience, you should avoid this option. On the other hand if you are considering this from an investment point of view, this may be a good idea. You can borrow money against property, invest the money and multiply it. Pay back the money and keep the profit.
How can I take loan against my house and get money instantly?
First of all, if you want urgent money against a house it is not possible. There is a process of taking a loan against property. Therefore, you will have to wait until the bank verifies your document. In addition, they will do the property valuation before approving your loan. Once the process completes, you will get the approval in a few days. Generally, the whole process takes about one to two weeks. This may take longer based on the real time situation.
What percentage of total property value banks give as loan against property?
First of all, they see your requirements. For example: your need for a loan is only 10-20 percent of the property value. In this case they simply approve. If you want the maximum amount then you can expect 60-65 percent of current market value as loan amount. Taking a loan against your house is not a very good idea so the minimum you take is better. This will save you from unwanted interest charges.
Will I get a loan against property if my credit score is low?
In this case your first priority should be to improve credit score. But if you are in urgent need of a loan then you can give it a try. There is a fair chance that banks approve loans against property under selected conditions. First of all, you should have a regular source of income and secondly you should not have a recent payment default. Above all this is a secured loan. Due to this banks have full right to sell your property to recover the loan. You may get loan approval. But I recommend, you talk to the bank official about the situation before applying for the loan.