In times of financial trouble, loans can work as a saviour and one loan that can be a solution to a lot financial problems is a Mortgage Loan (ML). Mortgage Loan belongs to the secured loan category where a loan is availed by keeping a property as security. It is generally availed by the self employed category. Property funded can be residential - self occupied or rented / commercial – premise or a shop or a plot of loan. Some banks also lend against industrial property subject to certain conditions. Funds can be used for expanding business, towards wedding expense of daughter or son, fund one's child's education and much more.

The loan amount mostly depends on the type of property is mostly around about 40% to 60% of the actual market property value. Loan amount is also subject to one’s eligibility as per income norms.

Advantages of ML

• ML is a convenient way to raise funds from the Lenders on the lowest possible interest rates.
• The value of the asset owned is pledged for taking a loan. Property continues to be in the name of the owner and the value of the asset can be put to a more productive use.
• The processing of ML is faster than a housing loan, as the property already exists.
• An opportunity to re-finance can be used to increase the loan amount for business which is on a continuous expansion spree. Same property can be used to build the business later as well.
• In a ML, the property continues to be in the ownership of the borrower.
• Incremental funding can be an option post 6 to 9 months of clean repayment. Further, if the value of the property has risen during the tenure of the loan, the owners also have the option to avail a top-up on their existing loan.
• Tenure is longer, which means lower EMI; ML also provides options such as part payment or foreclosure and more than sufficient repayment tenure of 5 to 15 years.
• ML is an effective tool for debt consolidation.
• The maximum loan amount varies from bank to bank. It could range from Rs.10 lacs up to Rs.10 Cr; however the exact amount depends on your property valuation, income and credit score.

The rate of interest these days are anywhere between 9% to 14%, but it may vary depending on one’s profile and the lender’s criteria.

ML Assessment

An eligibility criterion largely varies from one lender to another. The loan amount sanctioned depends on a lot of factors, the common factors that most lenders look at are

• Lenders consider income, savings, and debt obligations before it approves your loan.
• Eligibility is also calculated basis Cost/value of the property mortgaged.
• Repayment track record is also a deciding factor. Lender will also check Credit Performance and go through latest Credit Bureau Update.
• Debt servicing ability of the customer.
• Longer Business Vintage.
• Turnover, Business income and Financial Ratios.
• Existing relationship if any with the lender.

ML Process

Documentation and Login

Once the necessary documents i.e. personal, income and property documents are completed and collected, file is logged in along with a completed application form with required signatures.

Personal Discussion

The applicant and the co-applicants will either be called or visited by the credit team for personal discussion. In this discussion, the credit team will try to assess the customer basis income, net worth, past and future prospect of business.

Credit Appraisal

In this process the lender appraises the credit worthiness of the borrower. Here the bank will assess the borrower basis income of applicants and co-applicants, educational backgrounds and family history, business vintage, any other sources of income, past repayment history, current credit history, tax history, assets worth and their financing pattern, banking habit and history, other present and future liabilities and investments (if any). Every lender has its own financial and non-financial techniques to evaluate the creditworthiness of their customers.

Technical valuation and Legal

The lender will verify the property papers for their legality and check if there are no legal violations such as unapproved plans or construction. The lender will also conduct a valuation check to assess the current market value of the property and will lend only once the ascertain that the title of the property pledged with them is “clear and marketable”.

Sanction

Decisioning of the loan takes around 2-3 working days once the credit appraisal, legal and technical valuation is completed and based on financial capacity and the property the lenders may give conditional or unconditional sanction.

Disbursement

Disbursal of the loan will take a minimum of 2-3 working days once submits the stamped and signed loan agreement docket along with security cheques, ECS mandates and original property papers. After this, the loan gets disbursed as a onetime payment to the applicant.