Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
11 MAY, 2020
If you are in need of a big amount on an urgent basis, it is advised to apply for a loan against property. Getting a loan against property is quite easy, considering the fact that the loan is given against property as collateral.
The amount of loan provided will depend on the value of the property along with the income and repayment capacity of the borrower. But you must be careful before you apply for a property mortgage loan. Certain rules must be followed so that property mortgage loan does not later become a burden.
Here is a list of things you must follow:
Through loan against property, a large amount of loan can be sanctioned quite easily. Usually, banks give upto 90% of the property value as loan amount. But repaying the loan is as important as getting a loan.
So before you apply, calculate the EMI you would have to pay every month. Make sure that the EMI does not exceed your financial capacity, which is 50% of your income. Higher the EMI, lesser the chance for borrowers to retain money for other purposes like rent, insurances, etc. It can also increase the chances of missing the EMI payment.
It is advised to keep the duration of loan repayment as short as possible. While a long term loan will reduce your EMI amount, you will have to pay a higher interest amount. Certain banks and financial institutions give an option to reduce the loan tenure after a few years.
In such a case, the borrower can reduce the loan tenure by paying the remaining loan amount. This way, the borrower will be able to repay the loan faster and will also pay a lower amount as interest, thus saving money.
It is essential to pay EMIs on time, or it will increase the risk of property seizure. Firstly delay in payment of EMIs will lead to penalty fees. Delay of EMI payment will also reduce your credit score rating. Irregular payment of EMIs will lead to piling of interest, creating a financial burden on the borrower.
Bigger the loan amount, bigger is the risk. It is impossible to predict the future. If the borrower becomes unemployed or in case of medical emergencies, funds will be required, and it can lead to delayed payment of the EMI.
To avoid such a situation, it is advised to take insurance.
Before signing for the mortgage loan against property, do make sureyou read the terms and conditions in the loan document. These loan documents are lengthy, and many borrowers tend to skip it, which is not good.
Reading the terms and conditions will make you aware of the processing fees, penalties, EMIs, etc. If there is any doubt, you can clear it with your loan agent.
Terms & Conditions apply. Credit at sole discretion of Kotak Mahindra Bank Ltd. and subject to guidelines issued by RBI from time to time. Bank may engage the services of marketing agents for the purpose of sourcing loan assets.
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