A mortgage loan is a loan against the property issued by banks against your residential or commercial property. Mortgage loans are mostly taken at times of emergencies or needs. In general mortgage loans tends to attract higher interest rate compared to home loans. Let us look at various important things that you should know before choosing the mortgage loan.
1. Do you need a Mortgage loan?
This is the first question which you need to answer with utmost clarity. Mortgage loans are to be considered only during emergencies. Understand the reason for taking the loan, see if the same can be obtained using other modes of loan like a personal loan or jewel loan, etc. Mortgage loans are to be taken only for huge amounts. Opt for a mortgage loan only when you have exhausted other means of loans.
2. Type of Mortgage Lender
Mortgage loans are offered by various types of lenders both small and big. Let us look at various types of lenders.
- Financial Institutions
- Housing Finance Companies
- Private Agencies
You can take a loan against your property for a variety of reasons like marriage, hospital emergencies, buying another property, etc. Your first priority is to approach your bank where you have a long-standing account. It is better to keep private agencies as a last resort. RBI approved housing finance companies are also a good place to look for mortgage loans.
3. Loan amount
When you go for a housing loan, you are eligible up to 90% of the property value whereas this amount is much lesser for a mortgage loan. Generally, a bank will be willing to lend you around 60% of the property market value when you apply for a mortgage loan. You need to approach few banks and other companies to find out who offers the highest loan percentage.
4. Loan Tenure
The maximum tenure for a mortgage loan is 15 years. This is the maximum but the average is around 10 years. When a person is applying for a mortgage loan it means he is in some kind of financial trouble. Unlike housing loans which are taken for investment, mortgage loans are taken for emergencies for medical, education, marriages, etc. It is better to opt for a longer duration as the amount of EMI will also reduce when the tenure is extended. Of course you will end up paying more interest, but it will be affordable.
5. Fees and charges
Mortgage loans generally incur higher fees compared to home loans. This requires a home inspection, document verification, etc by the bankers which will cost them a lot and will, in turn, charge you a big processing fee. Looks for institutions which are new in the market or trying to capture market share. These financial institutions offer mortgage loans at a much cheaper processing fees. You should also look at various hidden charges that are associated with the mortgage loans.
To conclude try to avoid mortgage loan unless it is required for sure. Once you decide to apply for a mortgage then look at various factors like processing fees, loan tenure, type of lenders, etc before proceeding.