A mortgage loan is one of the most popular forms of credit. It’s relatively easily and quickly approved because, in this case, the borrower offers a piece of real estate as collateral.
Given this, a mortgage loan is one of the safest credits offered by a lender. Read on to understand this type of loan better to make the right decision for yourself.
What is a Mortgage?
According to the definition, a mortgage refers to an act of offering some collateral or security against any loan. It is a guarantee that almost every borrower must provide to the lender.
In case of not paying back the loan, the lender has the right to confiscate the collateral to get his principal back.
Let’s dig a furthermore into mortgage loans to understand them more clearly.
Mortgage Loans
A mortgage loan is a loan the borrowers can avail against any immobile assets as collateral. Therefore, this loan is also widely known as a loan against property.
In simpler terms, a mortgage loan is a type of loan that people borrow by offering the property as a guarantee against the sum. The lenders hold the assets until the loan is paid back. Also, it is the most preferred choice for home loans.
Apart from being effective, mortgage loans also come up with various offers and benefits to the borrower if the lender is a big firm. About half of the mortgage loans are taken for buying a house or refinancing a property.
Different Types of Mortgage Loans
Potential borrowers can apply for a mortgage loan and get the loan approved quickly. So, if you are planning to take a mortgage loan for yourself, it is better to look at the type of mortgage loan beforehand.
There are many more types of mortgage loans. Generally, these types vary from lender to lender.
Hence, we have given here the most common yet popular types of mortgage loans below:
Loan Against Property
This is the widely chosen mortgage loan type, also known as LAP. Simply put, it approves the loan by offering the properties as collateral to the lenders. The authenticated property documents will stay with the lenders until the loan is repaid in full.
However, the loan is restricted to only buying the other properties.
Lease Rental Discounting
The most common practice of getting a mortgage loan is leasing residential or commercial properties. Most often, people take loans against the least properties.
In this case, the monthly rent gets converted into the EMIs for the loan, and the bank usually gives the loan based on the rental basis.
Simple Mortgage Loan
In this type of mortgage loan, the borrower remains the sole owner of the assets given as collateral.
Although the property is not transferred to the lender, it has the right to sell the property after due process in case of non-repayment of the loan in the given tenure by the borrower.
Reverse Mortgage
This is a new kind of module for loans specially designed for the senior citizens of India. The process for such a loan is a bit complex and different from regular loans.
In this case, the lenders give the monthly EMIs or more like an income to the senior citizens if they mortgage their properties to the bank. This new approach now enables older people to have regular cash flow.
English Mortgage
In this mortgage loan, the borrower agrees to completely transfer the property ownership to the lender in case they cannot pay the loaned amount before a given date. And once the loan is paid in full back to the lender. The borrower can take back their properties.
Documents Required for a Mortgage Loan
Check the Mortgage loan documents required below:
- Application Form with Passport-size Photograph
- Age Proof (PAN Card, Passport, etc.)
- Residence Proof (Driving License, Election Card, Ration Card, Telephone Bill, etc.)
- Education Qualifications (Latest Degree)
- Last six months Bank Statement (salaried)/last 12 months Bank Account statement (self-employed)
- Previous two years Form 16 (salaried)/last three years IT returns with P&L Account&Balance Sheets certified/audited by a CA (self-employed)
To Wrap Up
Mortgage loans are a good way to replenish your funds. Lenders make it more convenient for people to apply for this loan. All you need to get the loans are just some necessary documents, and you will instantly get approved for the loan.
