A mortgage is a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full.
How it works (Example):
Mortgage loans are usually entered into by home buyers without enough cash on hand to purchase the home. They are also used to borrow cash from a bank for other projects using their house as collateral.
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There are several types of mortgage loans and buyers should assess what is best for their own situation before entering into one. Types of loans are characterized by their term dates (usually from 5 to 30 years, some institutions now offer loans up to 50 year terms), interest rates (these may be fixed or variable), and the amount of payments per period.
[If you’re ready to buy a home, use our Mortgage Calculator to see what your monthly principal and interest payment will be. You can also learn how to calculate your monthly payment in Excel.]
Mortgages are like any other financial product in that their supply and demand will change dependent on the market. For that reason, sometimes banks can offer very low interest rates and sometimes they can only offer high rates. If a borrower agreed upon a high interest rate and finds after a few years that rates have dropped, he can sign a new agreement at the new lower interest rate — after jumping though some hoops, of course. This is called “refinancing.”
Why it Matters:
Mortgages make larger purchases possible for individuals lacking enough cash to purchase an asset, like a house, up front. Lenders take a risk making these loans as there is no guarantee the borrower will be able to pay in the future. Borrowers take risk in accepting these loans, as a failure to pay will result in a total loss of the asset.
Home ownership has become a cornerstone of the American Dream. For most people, their home is their most valuable asset. Mortgages make home buying possible for many Americans. Mortgages are not always easy to secure, however, as rates and terms are often dependent on an individual’s credit score and job status. Failure to repay allows a bank to legally foreclose and auction off the property to cover its losses.
Types of Mortgages –
1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by deposit of title of deeds
6. Anomalous mortgage
1. Simple Mortgage –
In a Simple mortgage, the possession of the mortgaged property is not transferred from mortgagor to the mortgagee.
If the mortgagor fails to repay the loan, the mortgagee has the right to sell the property and recover the loan from the sale amount.
2. Mortgage by Conditional Sale –
Under such Mortgage, the mortgagor apparently sells the property to the mortgagee on certain conditions –
1.On failure to repay the mortgage money before a certain date the sale shall become absolute,or
2.On condition that on such repayment of mortgage money the sale shall become invalid,or
3.On condition that on such repayment the mortgagee shall retransfer the property.
In such case, the mortgagee is a “mortgagee by conditional sale”.
3. Usufructuary Mortgage –
In a usufructuary Mortgage, the possession of the mortgaged property is transferred to the mortgagee. The mortgagee receives the income from the property (rent, profit, interest, etc) until the repayment of the loan. The title deeds remain with the owner.
4. English Mortgage –
In an English Mortgage –
1.The mortgagor binds himself to repay the borrowed money on a certain date.
2.The mortgagor transfers the property absolutely to the mortgagee.
3.But such transfer is subject to the condition that the mortgagee will retransfer the property on repayment before the agreed date.
5. Mortgage by deposit of title of deeds –
In such mortgage, the mortgagor delivers the title document of the property to the mortgagee with an intention to create a security thereon. Such mortgage is valid in towns of Kolkatta, Mumbai and any other town as the State Government may notify by publication in Official Gazatte
6. Anomalous mortgage –
Anomalous mortgage is a combination of different types of mortgages.
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Loan for Purchase of Commercial Property
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Loan through Lease Rental Discounting
Lease Rental Discounting enables to encash your current rental cash flows to avail long term loan facility. The funds may be used for Business Expansion, Business Capital Requirements, Consolidating obligations or renovation or furnishing of house
– Avail long term loan facility for loans from ` 5 Lacs up to` 10 Crore
– Can be availed by Salaried, Self Employed Professionals and Self Employed Non-Professionals.
Mortgage Loan Eligibility
In order to get a mortgage loan, you need to fulfill certain minimum eligibility conditions. The following factors are considered while determining your eligibility for a mortgage loan:
- Your total annual income.
- Minimum age needs to be 21 years.
- If have any existing liabilities.
- Valuation of your property.
- Number of dependents you have.
- Your total work experience and experience in your current job.
- Financial documents.
- Both salaried and self-employed individuals are eligible to apply for mortgage loan.
Documentation required for a Mortgage Loan
The documents required for a salaried and self-employed individual differ slightly. A salaried individual needs to submit the following documents:
- A filled loan application form.
- A few passport size photographs.
- Proof of identity. As proof of identity you can submit voter card, driving license, PAN card, passport, employee ID card etc.
- Proof of address. Normally banks accept ration card, Aadhaar card, telephone bill, electricity bill, voter card and driving license as address proof.
- Your latest salary slips.
- Form 16 issued by your employer.
- Bank statements of last 6 months
- And a processing fee cheque.
A self-employed needs to submit the following documents:
- Application form.
- Recent passport size photograph.
- Identity proof.
- Proof of business existence.
- Proof of education qualifications.
- Certified financial statement for the last 3 years.
- Last 3 years income tax return certificate.
- Last 3 years profit and loss (P&L) statement.
- Last 6 months’ bank statement
- Processing fee.
How to use Mortgage Loan calculator
You can easily calculate your monthly mortgage payments with the help of a mortgage loan EMI calculator. It is very important to calculate what your mortgage payment will be and how much you can afford to pay given that you borrow a huge amount of sum as mortgage loan. But, before using the calculator, you need to know a few things about your mortgage loan which include – your loan tenure, rate of interest and processing fee. After that, the only thing you have to do is to put this information in the calculator. Immediately, the calculator will reveal your monthly EMI liability for your mortgage loan along with payment break-ups, total payable amount and your loan amortization schedule. BankBazaar, the one stop solution for all your financial needs, provides a unique mortgagee loan calculator by using which you can easily calculate your monthly repayments towards mortgage loan. Calculating and knowing your monthly EMIs for mortgage loan is important as it reduces your confusions by giving you a clear picture of how much money you will need monthly to pay off your loan. Also, you can get to know the optimum amount you can afford to take as mortgage loan. It also helps in planning your budget and setting your other financial targets.
Mortgage Loan Process
Being a debt instrument, you are bound to pay off your mortgage loan within a pre-determined period of time. Mortgage loans are normally taken by individuals and business entities for the purpose of buying and investing in real estate without paying the entire value of the purchase up front. But, if you fail to pay off your mortgage, the bank can foreclose or repossess your property. A mortgage loan is a long term debt designed to help you purchase your desired property.
You get ample time to pay off your loan, as a mortgage loan is normally taken for a longer period. The major factors that influence the repayments process are the size and term of the loan. The size of a loan refers to the amount borrowed from your lender and the term denotes the tenure of loan within which it needs to be repaid. If you borrow a huge of money for a longer tenure, you can pay it off by paying smaller EMIs. Because longer tenure results in smaller monthly repayments. That’ s why many people choose tenures like 20 years and 30 years to pay off mortgage loans.
Once you decide to take a mortgage loan and approach your bank, the bank representatives will help you in documentation. After submitting all required documents, bank will verify those documents, and upon successful verification of your documents, you bank will approve your mortgage loan.
Normally, the followings steps involve in the whole process:
- Collection of necessary documents for loan processing.
- Credit appraisal by you bank.
- Loan sanction after proper credit check and verification of information.
- Sanction letter delivery at your doorstep along with a soft copy sent to your Email Id.
- Request for disbursal.
- Property documents collection by bank.
- Documents are legally examined.
- Upon successful verification, disbursement cheque is prepared and delivered.
Features and Benefits of Loan Mortgage loan:
A mortgage loan comes with the following attractive features and benefits:
- It is a cost effective way of borrowing. Normally, you can take a mortgage loan for a longer duration and pay off your repayment by using smaller monthly EMIs.
- Mortgage loans charge lower rates of interest on your borrowings than any other loans.
- Mortgage loan is a secured loan. It is secured against your property. The bank or lender has the right to repossess your property if you can’t repay your loan.
- A mortgage loan helps you buy your own house. You can afford to buy a home with the help of this loan and be the sole owner of your property once repayment is over.
- You can get loans against under construction property, fully constructed property, freehold residential and commercial properties for:
- Get loan for a longer tenure.
- Repay your loan with a simple repayment process through monthly instalments. You can pay it off by paying smaller monthly EMIs.
- Mortgage loans are offered at attractive interest rates.
- Enjoy an easy and hassle free documentation process.
- You can get a mortgage loan anywhere in India with integrated branch network provided by banks.
- You can choose from a number of interest rates to pay off your loan. They include – floating rates, fixed interest rates, interest-only mortgage and Payment option ARMs.
- Get access to a higher amount of funds.
- Mortgage loan can be sectioned even before your select your property.
- You can apply for it both online and offline and enjoy doorstep services.
- Both residential and commercial properties are accepted as collateral for mortgage loan.
- Funds received from a mortgage loans can be used for business as well as personal needs.
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