Loans against property or mortgage loans are one of the most popular types of secured loans in India. These are loans availed of by pledging a residential or commercial property or a piece of land as security. The mortgage loan process is also fairly simple — the borrower applies for a loan by pledging a property they own as collateral.
Once the lender they have applied to accepts this request, they sanction a loan but also place a lien on the property, which allows the borrower to uses the pledged collateral however they deem fit but makes it impossible for them to sell it before they have cleared the entire loan.
Low interest rates, long repayment tenor, high loan amounts and zero end-use restrictions are some of the key things that make property loans quite popular in India. However, since these loans are long-term loans that involve a substantially high loan amount, one must make every effort to secure them at the loan against the property lowest interest rates.
This article is a must-read for all those loan applicants who are planning to avail themselves of a property loan and that too at the best mortgage loan interest rates in India.
Mortgage Loan Interest Rates in India: How to Secure the Best Deal
Here are a few simple things mortgage loan applicants can do to avail themselves of the lowest mortgage loan interest rates in India.
1. Maintain a High Credit Score: One of the best things that you can do to make yourself eligible for the lowest loan against property interest rates is apply for a mortgage loan with an impeccable credit score. Credit scores reflect loan applicants’ repayment capacity and creditworthiness.
Individuals with excellent credit scores are people who never default on loan repayment and therefore, lenders sanction them loans at the lowest interest rates along with other beneficial loan terms and conditions. To be eligible for a mortgage loan at the lowest interest rates, maintain a credit score in the range of 750 to 900.
Check your credit score a few months before you plan to apply for the loan. Go ahead with your loan application only if your credit score is within the ideal range.
2. Pledge a High-Quality Collateral: Since mortgage loans are backed by collateral or security, which is the biggest reassurance for the lender, it is not surprising that lenders decide the loan terms and conditions based on the quality of the collateral.
Residential properties generally help borrowers avail themselves of lower mortgage loan interest rates in India. Similarly, properties located in posh locations or villas and flats in gated communities with all modern amenities or built by some of the most well-known and reputed builders help alleviate any doubts a lender may possess about the borrower’s creditworthiness while also encouraging them to extend loan against property lowest interest rates.
3. Opt for a Low LTV Ratio Loan: LTV ratio is the ratio of the loan amount sanctioned to the total value of the property pledged as collateral. The LTV ratio is essentially the percentage of the pledged collateral’s total market value that has been sanctioned as a loan. High LTV ratio loans indicate that the loan applicant is requesting a high loan amount.
When the loan amount is high, the chances of loan default increase automatically. Therefore, to establish candidature for loans against property lowest interest rates, borrowers must opt for low LTV ratio loans.
One can also use the LTV calculator to figure out exactly what loan amount are they eligible for and what loan amount they should apply for.
4. Income and Job Stability are Important Too: While loans against property are loans backed by security or collateral, no lender will sanction you a loan if your income isn’t enough to help you cover your loan EMIs.
People who switch jobs often are seen as high-risk borrowers by lenders, people who are more likely to default on loan repayment. Therefore, lenders never offer the best loan terms and conditions they have to offer to such loan applicants.
So, individuals applying for a loan against property must make it a point to not switch jobs often and instead, maintain job and income stability.
Final Words
Other than the tips mentioned above, you can also consider refinancing your property loan or opting for a balance transfer if you find a lender willing to offer you a better deal in terms of property loan interest rates.
Paying an extra EMI each year and making lumpsum payments whenever possible will also allow you to reduce the effective interest rate on your loan against property.
