Ever dreamt of possessing a new home but lacking funds for it? If yes, then you are not alone. Buying a home can be a major decision in anyone’s life. Since it involves a huge outflow of cash, a person ends up sacrificing a big sum of his life savings for purchasing a home. But is it possible that you acquire a property with the least financial burden? Yes, definitely. With the help of home loan products offered by a number of financial institutions, you can easily finance your dream home. The home loan can be taken with a surprisingly low loan against property interest rate.
What is a home loan?
It is a secured form loan where you are required to put your home as collateral to the lender who is assisting you in financing that property. The specialty of this loan is that it can be of a high tenure which means you can expand your EMI payment for a large period of time. You can use a loan against property calculator in order to work out your EMIs and the total interest payable on the loan amount.
Essential features of a home loan
- Low interest rates– The loan against property interest rates are lower than the unsecured form of loans such as the personal loan. Since the lender has the assurance of payments as you submit the property as collateral, the loan can be provided at low-interest rates. Typically, the interest rates on loan against property vary from 8% to 12%. For exact details about interest rates and other processing charges, you can visit your lender’s website.
- Longer repayment period– The loan tenure can extend as much as 20 years with many loan providers. It means you are good to settle your dues in the form of EMIs that can go up to 20 years. You should note that a longer tenure would reduce the EMI amount but you have to pay more interest charges in total, over the borrowed sum of money.
- Loan amount– The loan amount can be obtained for up to 75% of the value of the property with many leading financial institutions. With home loans, you have to make a down payment and the remaining amount is financed by your lender.
- Multi–purpose loan– It is not necessary that only your dream home is pledged as collateral to the lender since collateral can be any immovable asset owned by you. Also, the LAP can be taken for other purposes as well. In case you require funds in an emergency, you can take a loan against property by providing your existing property as collateral to the lender.
- Least documentation required– The lender only requires your KYC documents, property documents, and income proof documents, before processing the loan. Since the collateral is provided to the lender, an extensive documentation process is not required
Factors that determine your loan against property interest rate
The interest rate of your LAP can be determined on the basis of the following factors-
- Loan tenure- Financial institutions can provide loans for up to 20 years in case of LAP. However, some lenders provide for a LAP for a maximum of 15 years. The interest rate is likely to be less when the tenure is high. Similarly, a shorter loan duration would attract a higher interest.
- Type of property- If the property is expensive, the interest rate will be low. For instance, it is easy to get a loan against commercial property with a low-interest rate. While the loan against property interest rate for a new home is likely to be higher.
- Credit rating- The credit score plays a major role in determining the interest rate of your LAP. It is essential that you maintain a good credit score. It will provide assurance to the lender for continuous loan EMI repayments and they can provide you a loan with lower rates of interest.
How to use loan against property calculator?
For your convenience to figure out the EMI value, many lenders provide a loan against property calculator on their websites. You can easily know your EMI obligations by entering the figures in this calculator.
It will ask you to enter three basic details which are- your loan amount, the interest rate and the repayment period. With a single click, you can see the figure for your monthly instalments. You can even adjust your repayment tenure to see how it impacts your EMIs. Based on this analysis, you can determine the best loan period for yourself.
Summing it up
A loan against property can be taken when you are purchasing a house as well as for other financial obligations. The lender can grant you the funds on the basis of the pledged property and you are free to use the loan amount as per your needs.
For a home loan, the same property can be put as collateral for which the loan is taken. In case you fail to repay the loan, the lender reserves the right to sell the property and recover dues. If you wish to keep the loan against property interest rate lower, it is advisable that you maintain a good credit score.