Documentation for Loan Against Property - What You Need to Know

As a business owner, you may find yourself in urgent need of funds any time, and for any number of reasons, be it for purchasing machinery or raw materials, opening a new plant, or hiring more labour. And a loan against property can come in extremely handy then, since it is easy to avail and you receive a large amount of money in one go. Plus, long tenures make it simple to repay such loans. However, checking whether you are eligible and have all the necessary documents in place, is essential. So, read on to know more.

A Bit About Loan Against Property

If you have any property that you are not currently using – residential or commercial – you can offer it as collateral to apply for this loan. With this kind of loan, you can get long repayment tenures (up to a maximum of 15 years) and low interest rates, as you are offering something as valuable as a property as collateral. You can also get a high amount of loan, since a property’s value is likely to be high and might appreciate as well.

Also Read: Loan Against Property For Businesses

How Does It Work?

When it comes to loan against property, financial institutions may have varied terms and conditions, but there are some common factors:

• Flexible: you can offer almost any type or size of property as collateral; even a mixed use (residential cum commercial) property – buildings, land, shops, factories, apartments, plots, educational institutions, healthcare institutions, and so on.
• Title: should be clear with no dispute, and it should be marketable. Make sure there is no existing loan on the property, and that it is not the subject of any court case.
• Insurance: the property offered as security should be insured against fire, natural calamities, and other perils.

When you apply for a loan against your property, the lender will get the property valued by an independent assessor and offer a certain percentage of that value – say from 60 to 80 percent – as loan.

Loan Against Property Eligibility

Loan against property can be availed by both salaried people and business owners who have an insured property with a clear title to pledge as security. Business owners can use the funds for expansion and salaried people can use it for higher education of their children, home renovation, unforeseen medical expenses, family weddings, or something similar.

In addition to the property, the lender may also consider the following – age and occupation of the borrower, income and cash flow, financial stability, etc.

Also Read: Loans Against Property - A Ready Guide

Loan Against Property Documents Required

When you apply for a loan against your property, you will be required to submit a few documents.

ID Proof 

• Duly filled application form
• Proof of identity – Aadhar, Voter ID, Driver’s license, Photo ID issued by a Govt body, a letter that verifies the customer’s ID signed by a public servant or authority (any one of these)
• PAN card

Address Proof: 

Any of the ID proofs mentioned above which has your address, or any of the following:

• Electricity/phone/broadband bill
• Rental agreement on stamp paper
• Account statements/passbook/post office savings book with address
• Credit card statements (past 3 months)
• LIC policy
• Receipts of property tax paid
• Property sale deed if applicable
• Employer’s letter for certificate of residence
• For retired government employees, pension orders with address
• Any document issued by foreign embassies/missions in India or government departments under foreign jurisdiction
• Accommodation allotment letters or leave and license agreements issued by government bodies, financial institutions, PSUs, listed companies etc.

Income Proof: 

• Previous 2 months’ salary slip
• If you have a salary account, account statements for 6 months
• IT returns/Form 16

Additionally: 

Details of current loans and 6 months’ statements showing repayment of the same.

Property Documents 

• Entire chain of property documents, if applicable
• A copy of the property plan with approval, if applicable

Also Read: Key Questions About Loans Against Property Answered

Conclusion

You now have a fair idea about the documents required for mortgage loan. Here are a few more things to consider before you apply:

• Ensure that you actually need the funds for a productive purpose
• Have a repayment plan in place – cashflows, business plan etc.
• Have a backup plan in case you find it difficult to pay the instalments
• Choose the tenure carefully – longer terms mean lower instalments, but higher total interest burden
• Take a call on the type of interest you want – fixed or floating, flat or reducing

All in all, keep in mind that a loan against property helps you to get funds to meet your financial obligations while you still retain the property’s ownership. Hence, as long as you make sure that you are eligible, submit all the relevant documents, and repay on time, this form of loan is perfect for you.