Myths busted about Loan Against Property
A loan against property has clear advantages over many other financing choices on the market—it provides a large loan amount that may be utilized to fund your children’s further education, wedding expenditures, business growth, and other things. Despite the apparent benefits, there are a lot of misconceptions and rumors about home equity loans. You’ve come to the perfect site if you’re seeking a way to refute some common loans against property misconceptions and get accurate facts. Today, we’ll clear up some common misconceptions and questions about a loan secured by real estate.
Myths About Loans Against Property:
A loan secured by real estate not only provides a larger loan amount and cheaper interest rate, but it also comes with a number of misconceptions. To clear up these misconceptions concerning loans against property, we’ve put together a collection of commonly asked questions about loan against property myths.
- Is it possible for me to use the repossessed house?
In the realm of finance, this is one of the most often asked questions. The majority of people believe they cannot utilize their property once they have pledged it to obtain a loan against it. The actuality, however, is not at all like the legend. While you’re mortgaging the property, you can use it as needed; just make sure you don’t fall behind on your monthly payments. To answer your question, yes, you may borrow against your mortgaged property (LAP).
- Is it true that a loan against property can only be used to buy a house
Many borrowers mistakenly assume that an LAP may only be used to finance a home. Furthermore, only a small percentage of people link LAP with mortgages. The truth is that LAP may be used for both residential and commercial properties. By mortgaging your store, enterprises, factories, and offices, you can obtain a loan against your property.
- Is it possible to achieve a 100% LTV on my mortgaged home?
Several factors influence the loan-to-value (LTV) ratio in property loans. For a loan against property, each lending institution has its own set of rules. The LTV ratio might vary between 40% and 75% depending on those conditions. The market worth of the property, as well as the financial institution’s internal regulations, influence the amount of a loan against property. As a result, you will not receive the entire value of your mortgaged property.
- Is it possible to get a loan secured by real estate for a shorter period of time?
Those who inquire about this will be shocked to hear that an LAP has a lengthier repayment time than other loan types. Personal loans, motorcycle loans, auto loans, and other sorts of loans can all be taken out for up to five years. A loan secured by real estate, on the other hand, has a maximum payback duration of 15 years. To qualify for a longer-term LAP, you must fulfill the loan against property eligibility conditions of your chosen lending institution.
- Do I have to pay a higher interest rate on my home equity loan?
Another one of the loans against property urban legends. The property’s skyrocketing price has caused this misconception. If you’re interested in learning more about how loans against property function, keep in mind that the interest rate on an LAP is influenced by a number of variables. Among these are the property’s valuation, its nature, the applicant’s income and employment, and a few other factors. LAP has a lower interest rate than other loan types since it is a secured form of financing with a greater value mortgaged property.
- Is it possible for me to apply the loan to property funds of my choice?
Financial institutions do not impose any limits on the use of money from an LAP, unlike business loans, two-wheeler loans, or used vehicle loans. The loan against property money can be used for a variety of objectives. It is suggested that you use a loan against property for a project that demands a larger quantity of money since the collateral involved is of higher value. If your requirements are modest, you may want to take out a personal loan.
- Is the loan amount sanctioned dependent on the property’s purchase price?
Assume your father or grandpa bought a home in the 1960s for Rs 1 lakh. In 2021, you go to a bank and put the property up as security, and the lender disburses the loan depending on the purchase price of the property. Is this a scenario that might happen? Not in the least. When considering a loan against property eligibility, the lender takes into account the property’s current market worth.
- Is my mortgaged home taken over by the lender?
Another popular loan used to debunk property fallacies is this one. Many borrowers assume that having collateral or a mortgage means their property is in the financial institution’s hands. This is not the case, though. Lenders only take possession of a property when the borrower fails to pay their loan EMIs. The lender auctions the property to recoup the loan amount if the borrower defaults.
Now that all of your misconceptions regarding loan against property have been debunked, it’s time to apply for an LAP without delay. To avoid falling victim to any of the myths, it’s a good idea to review the terms and conditions of your preferred lending institution, as well as the qualifying requirements for a loan against property.