- What are the different types of Mortgage Loans?
- Know about Home Loan, Loan Against Property and Reverse Mortgage loan in this post
If we were to make a list of most popular secured loans, it would be no brainer to guess the top place – Mortgage Loans. The reason behind their wide popularity is the ease and convenience with which customers can get the required loan amount for their different needs. Banks and Non-Banking Finance Companies (NBFCs) provide different kinds of mortgage loans to customers at affordable rates of interest. Now you must be thinking about what are the different types of Mortgages?
Before knowing the types, it’s important to know the meaning of Mortgage. Well, a mortgage is usually a transfer of interest or loan sanctioned against an immovable asset which will function as collateral until the borrower repays the amount. Now coming to the types, there are mainly three types of Mortgages – Home Loan, Loan Against Property and Reverse Mortgage Loan. These three mortgage loans help meet the different needs of different people. Since the loan amount is backed by the asset, the interest rates are usually lower which is also one of the reasons behind the popularity of mortgages.
In this post, we will extensively cover these 3 types of Mortgages, their features, interest rates, tenure, and other important details. So, this could be a good read for you if you are looking to know about mortgages. Keep reading to know more!
Let’s Know about the Types of Mortgages
As we said earlier, Mortgages can be divided mainly into 3 types and these are Home Loan, Loan Against Property and Reverse Mortgage Loan. We are showing details about each of these mortgages. We are starting with the most popular loan options among customers; Home Loan. Have a look.
Everybody wants to move from a rented place and live in his or her own place. This is why one of the most commonly sought after loans in India is the Home Loan. A customer, with the help of a Home Loan, cannot only purchase the property but also fulfill purposes such as Home Renovation, Repair, Extension, etc.
The reasons behind its popularity are several – Higher Loan Amount, Affordable Interest Rates, Flexible Tenure, Tax Benefits, etc. An individual can easily fulfill his dream of having his or her own home with this type of mortgage loan. We are showing some of the prominent features of Home Loans below. Check it out.
- In the case of this mortgage loan, lenders provide the loan amount according to the overall property value. This thing is known as the Loan-to-Value (LTV) Ratio and decides an individual’s eligibility. Lenders provide a higher loan amount ranging from 75% to 90% of the overall price. To know different LTV slabs, you can check the below table.
|Loan Amount||Loan-to-value Ratio|
|Upto INR 30 lakh||90% of the Property Value|
|INR 30 lakh to INR 75 lakh||80% of the Property Value|
|Above 75 lakh||75% of the Property Value|
- As we talked about the affordability of this mortgage, Home Loan Interest Rates usually vary from 7% to 9% per annum on an average. Also, home loan interest rates can vary from one individual to another and depend on factors like the Applicant’s Age, Employment Type, Monthly Income, Existing Obligations, and most importantly, Credit Score. Lower interest rates can make your repayment (EMIs) lower and vice versa. We are showing interest rates of some of the top lenders in India. Please check it out.
|Lenders||Rate of Interest (In per annum)|
|State Bank of India (SBI)||8.05%-8.55%|
|Axis Bank||7.60% - 8.05%|
|ICICI Bank||8.75% - 9.80%|
|HDFC Limited||8.65% - 9.95%|
|Bank of Baroda||7.45% - 8.80%|
|LIC Housing Finance (LIC HFL)||8.65% - 10.25%|
|Tata Capital||7.75% onwards|
|Bank of India||6.90% - 8.75%|
|PNB Housing Finance (PNBHFL)||8.50% - 10.35%|
- This type of Mortgage loan can be taken for a longer tenure and are quite flexible. So, customers can choose upto a maximum tenure of 30 years within which they can repay the loan amount. Paying EMIs for a longer period of time without fail will also impact your credit score positively.
- Customers can also avail tax benefits upto INR 3.5 lakh (Deduction of upto INR 1.5 lakh on the principal amount and upto INR 2 lakh interest payment of the home loan) under Section 80C and Section 24 of the Income Tax Act respectively.
- A Mortgage Loan in the form of a Home Loan also brings a certain credit mix in your overall profile because of its secured nature.
- Home Loan Lenders also offer Balance Transfer with which customers can transfer their outstanding principal balance to another lender at lower rates. Apart from this, they can get a Top-up on their existing loan amounts.
Loan Against Property
One of the other popular secured loans is the Loan Against Property with which customers can get the required loan amount by keeping their property (asset) as a mortgage. Customers have the freedom to put their land, house or any other property as the collateral.
So how is this mortgage beneficial for borrowers?
Well, suppose you don’t want to opt for an unsecured loan (personal loan) because of high-interest rates. In such a case, a Loan Against property could be a suitable choice due to its affordable interest rates and longer tenure. Also, similar to a personal loan, there is no end-use restriction on the loan amount. We are showing some of the important features of this loan. Please have a look.
- Due to its secured nature of Loan Against Property, interest rates are quite affordable for customers who want funds urgently. Loan Against Property Interest Rates, usually, range from 8 to 13% per annum which is comparatively lower to other loans. We are showing interest rates of some of the top lenders. Please check.
|Lenders||Rate of Interest (In per annum)|
|Axis Bank||10.50% - 11.25%|
|HDFC Ltd.||8.75% - 10.40%|
|ICICI Bank||8.35% - 9.50%|
|Union Bank of India||8.40% - 10.65%|
|Bank of India||8.85% - 9.35%|
|SBI||7.00% - 7.70%|
|United Bank of India||8.70% - 9.80%|
|Standard Chartered Bank||9.65% - 10.05%|
|Punjab & Sind Bank||9.35% - 9.70%|
|Bank of Baroda||8.20% - 13.35%|
- Your mortgage can also get you a higher loan amount with the Loan Against Property. The LTV ratio generally ranges from 65% to 70% of the overall price of the property. This LTV tends to vary from one lender to another.
- As we mentioned about the longer tenure earlier, customers can choose a repayment tenure upto 20 years. A longer tenure can help you avail of pocket-friendly EMIs.
- Do you know what is the best thing about this type of Mortgage Loan? Well, borrowers can still have the ownership of property which means he or she continues to own and utilize the property. However, lenders can recover the loan amount in case of any defaults from your side, so don’t forget to pay EMIs on time.
- If you are looking to opt for a loan amount with lenient eligibility criteria, this mortgage loan could be the best option for you as lenders don’t put strict conditions to fulfill.
Reverse Mortgage Loan
Exclusively designed to help fulfill the financial needs of Senior Citizens (above 60 years of age), several lenders provide Reverse Mortgage Loans to such customers. Many times you will see, senior citizens do not have a steady source of monthly income in their twilight period of life. But they can opt for Reverse Mortgage Loan if they own a residential property in their name located in India. This property can be a house or flat. In the case of Reverse Mortgage Loan, lenders do not expect borrowers to service the loan during his or her lifetime. Let’s look at some of the highlights of the Reverse Mortgage Loan.
- The first thing that you need to know about the Reverse Mortgage Loan is who can opt for this loan. As we said earlier, only Senior Citizens (60 years or above) who own a residential property can get the loan amount. If a borrower wants to avail this loan jointly, the other should be 55 years of age or above. This criteria regarding the co-applicant’s age can be different for different banks. For example, at SBI, this age criterion is fixed at 58 years.
- Lenders either provide the loan amount via Fixed Monthly Payments or via a Lump Sum amount. This amount tends to change from one lender to another. Also, lenders decide the loan amount based on age, property value, current interest rates and the plan chosen by the customer. Lenders will also do an evaluation at regular intervals.
- Customers will need to keep paying taxes on the mortgage during the tenure of the Reverse Mortgage Loan.
- The repayment tenure can range from 15 to 20 years and customers can choose according to their convenience and needs. It also depends on the age of the borrower.
- One of the crucial reasons behind the popularity of Reverse Mortgage Loan is its affordable interest rates. We are showing some of them below. Have a look.
|Lenders||Rate of Interest (in per annum)|
|SBI||8.05% - 9.05%|
|Axis Bank||Starting from 11%|
|Bank of Baroda||9.00%|
|Union Bank of India||Customized|