Mortgage Loan: Meaning, Types, Benefits, Application Process

Reasons for availing of a loan vary from person to person, and so do the factors affecting the decision-making process. If your priorities are a high loan amount, a low rate of interest, quick loan processing, or easy documentation then consider the strategic benefits of applying for a mortgage loan. In the Indian financial landscape, a mortgage serves as a powerful tool to unlock the dormant value of your immovable assets.

What is a Mortgage Loan in India?

By definition of mortgage loan, it is a secured financial product taken against a commercial or residential property such as land or buildings. To apply for a mortgage loan, you must pledge your property documents to the lending institution as security. This process creates a legal charge on the asset. Similar to other products, you must repay the principal amount along with interest over a specified time in the form of EMIs or equated monthly instalments.

However, handing over the custody of property documents does not mean that you cannot use the mortgaged property. You retain complete freedom to use your property as you deem fit for residential or business purposes. There are many types of mortgage loans in India, but the most popular one is the Loan Against Property (LAP). According to the Transfer of Property Act, 1882, a mortgage is specifically the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced.

How Does a Mortgage Loan Work?

Understanding how mortgage loans work is essential for long-term planning. These are secured loans in which the lender keeps the collateral documents until the loan is repaid in full. As per the latest RBI Master Direction on Responsible Lending Conduct, lenders must release all original property documents within 30 days of full repayment. Failure to do so requires the lender to compensate the borrower at ₹5,000 for each day of delay.

During the initial repayment phase of a mortgage, personal loan, the interest component makes up a higher portion of the EMIs. As you progress, the principal component increases. If you opt for a fixed interest rate, the EMI remains unchanged; however, most Indian borrowers prefer floating rates to benefit from changes in the external benchmark (REBIT) or repo rate cuts.

What Are the Different Types of Mortgage Loans in India?

At Hero FinCorp, mortgage loans are categorized based on the purpose of the funds and the type of property involved:

• Home Purchase Loan: Used specifically for buying a new or resale residential property.
• Home Construction Loan: Tailored for individuals who already own a plot and need funds to build a house.
• Plot Purchase + Construction Loan: A composite loan designed to help you buy a piece of land and construct a home within a specific timeframe (usually 2–5 years).
• Home Improvement & Extension Loan: For those who want to renovate, repair, or add more space (like an extra floor) to their existing property.
• Loan Against Property (LAP): A multi-purpose loan where you mortgage your existing residential or commercial property to get funds for business expansion, weddings, or medical emergencies.
• Home Loan Balance Transfer: This allows you to move your existing high-interest mortgage from another lender to Hero FinCorp for better rates and service.

Also Read: Home Loan and Construction Loan: Meaning, Comparison, and Benefits

Benefits of a Mortgage Loan

• Attractive Interest Rate: Financial institutions offer mortgage loans at lower interest rates compared to unsecured personal loans. As the loan is backed by high-worth land or building, the risk is mitigated.
• Flexible Tenure: Since these loans often involve high amounts, the repayment period can extend up to 20 years, allowing borrowers to manage cash flows without strain.
• High Loan Amount: The amount is determined by the property's current market value. Per updated RBI LTV (Loan-to-Value) guidelines, you can typically acquire a loan amount ranging from 60% to 75% of the property's value for LAP depending on the asset's liquidation value.
• Multipurpose Loan: Funds can be used for business expansion, medical emergencies, or children's higher education.

Who Is Eligible for a Mortgage Loan?

Hero FinCorp provides mortgage solutions to a wide range of applicants, though specific products like "Loan Against Property" may focus more on business owners in certain regions. Generally, the following are eligible:

• Salaried Individuals: Employees working in reputed private firms, MNCs, or government organizations.
• Self-Employed Professionals: Doctors, CAs, Architects, and Consultants who have their own practice.
• Self-Employed Non-Professionals: Business owners, traders, and entrepreneurs with a stable and profitable business history.
• Women Entrepreneurs: Hero FinCorp offers specialized LAP options for women to help them grow their businesses.

Eligibility Criteria for Mortgage Loan

To qualify for a mortgage loan at Hero FinCorp, applicants must meet the following standard benchmarks:

• Age: Usually between 21 and 70 years (at the time of loan maturity). For specific LAP products, the range is often 25 to 75 years.
• Credit Score: A CIBIL score of 750 or above is preferred to secure competitive interest rates.
• Business/Work Stability: Salaried individuals typically need 1–2 years of work experience. Self-employed applicants usually require a business vintage of at least 3 years.
• Income Level: A stable and consistent income is mandatory. While Hero FinCorp is flexible, your income must be sufficient to cover existing debts plus the new EMI (ideally a FOIR/Debt-to-Income ratio below 50%).
• Property Type: The property must have a clear, marketable title and be located in a Hero FinCorp-approved geographical area.

What Documents Do You Need for a Mortgage Loan?

The documentation process is digitized and hassle-free, but you will need to keep the following ready:

• Mandatory Documents: Duly filled application form and PAN Card.
• Identity & Address Proof: Aadhaar Card, Passport, Voter ID, or Driving License.
• Income Proof (Salaried): * Latest 3 months’ salary slips.
  • Form 16 or ITR for the last 2 years.
  • Bank statements for the last 6 months showing salary credits.
• Income Proof (Self-Employed):
  • ITR for the last 2–3 years.
  • Certified Financials (Balance Sheet and P&L Statement).
  • Bank statements for the last 6–12 months.
• Property Documents: * Title deeds (the entire chain of ownership).
  • Approved building plan and allotment letter (for construction/purchase).
  • No Objection Certificate (NOC) and tax receipts.
• Business Proof: GST registration, Trade License, or Partnership Deed (for self-employed).

How to Apply for Mortgage Loans?

You can apply for a mortgage loan online via the website of a regulated NBFC like Hero FinCorp or visit a branch.

1. Visit the official mortgage loan against property page.
2. Use the LAP Eligibility Calculator to check your limit.
3. Fill out the online application form and upload digital copies of your documents.
4. A technical and legal valuation of your property will be conducted by empanelled agencies before final sanction.

Conclusion

Choosing a mortgage loan is a significant financial commitment that allows you to leverage your property’s value while retaining its usage. By understanding the eligibility for mortgage loan and aligning with RBI compliance norms, you can secure high-value funding at competitive rates. Whether you are looking to expand a business or manage personal milestones, a mortgage personal loan offers a structured and cost-effective path to achieving your goals. Always ensure you partner with a regulated NBFC and review the Key Facts Statement (KFS) to ensure a transparent borrowing experience.

Frequently Asked Questions (FAQs)

What Is The Definition Of Mortgage Loan Compared To A Home Loan?

While both are secured by property, a home loan is specifically used to purchase or construct a new house. In contrast, the definition of mortgage loan (or Loan Against Property) involves pledging an existing property you already own to raise funds for any multi-purpose need, such as business or education.

How Does A Mortgage Loan Work Regarding Interest Rates?

In India, most mortgage loans are linked to an external benchmark, such as the REBIT or Repo Rate. This means your interest rate may fluctuate based on RBI’s monetary policy. You can choose between fixed or floating rates, though floating rates are generally preferred for long-term savings during rate-cut cycles.

What Is The Maximum Tenure For A Mortgage Personal Loan?

As per current industry standards and mortgage loan criteria, lenders typically offer a flexible tenure of up to 20 years. This longer duration helps in reducing the monthly EMI burden for high-sanction amounts.

Can I Apply For A Mortgage Loan On A Property That Is Currently Rented Out?

Yes, you can apply for a mortgage loan on a property occupied by tenants, provided you have a clear, marketable title and the property is within the lender’s authorized geographical limits. The rental income can often be used to supplement your eligibility for a mortgage loan.

What Happens If I Fail To Meet The Mortgage Loan Criteria For Repayment?

Since this is a secured product, defaulting on payments allows the lender to initiate recovery proceedings under the SARFAESI Act, 2002. This could eventually lead to the legal attachment and sale of the pledged property to recover the outstanding dues.

Is There A Penalty If The Lender Loses My Property Documents?

Yes. Under the latest RBI guidelines, if a lender loses your original title deeds or fails to return them within 30 days of loan closure, they are liable to pay a compensation of ₹5,000 per day of delay to the borrower.

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