A mortgage loan is a secured loan where one can avail funds from any bank or NBFC by providing any immovable asset like a house or a commercial property as a collateral. Mortgage loan has no end use restrictions. Funds can be utilized for any purpose such as overseas education, a wedding, a home renovation, and a family vacation etc.
Loan availed to purchase a house, or a commercial asset also falls under mortgage loan as the asset is mortgaged to the institute till the loan is cleared. One can avail loan on any asset or property owned. This loan is commonly called as ‘loan against property’ and categorized as a mortgage loan. Mortgage loans have less risk to the lender as they can sell the asset and recoup the money.
A mortgage loan is a type of secured loan that one can avail by keeping an immovable asset as mortgage with the lender. The asset can be a residential/commercial property or other immovable properties like heavy machinery. This is different from a housing loan that is taken for buying a house or a property.
This type of loan is secured on the borrower’s property. Such loans are long-term advances with repayment tenors ranging from 15 – 20 years and interest rates much lower compared to unsecured advances. One can utilise the loan amount to meet diverse funding needs involving big-ticket expenditures such as overseas education, a grand wedding, unforeseen medical expenses etc.
The different types of mortgage loans in India are listed below.
- Loan against property
- Loan against property for home renovation
- Loan against property for debt consolidation
- Loan against shop
- Loan against machinery
- Loan against property for marriage
- Loan against property for higher education
As per Section 10(43) of the Income Tax Act, any amount received as a loan , either in lump sum or in instalment in a transaction of reverse mortgage is exempt from tax i.e. not be treated as income of the senior citizen although loan is a capital receipt as per Section 47(xvi).
| Salaried Employees | Self Employed/Professionals |
| Duly filled Application Form with Photograph | Duly filled Application Form with Photograph |
| Age Proof (PAN Card, Passport, Any other Certificate from Statutory Authority) | Age Proof (PAN Card, Passport, Any other Certificate from Statutory Authority) |
| Residence Proof (Passport, Driving License, Telephone Bill, Ration Card, Election Card, Any other Certificate from Statutory Authority) | Residence Proof (Passport, Driving License, Telephone Bill, Ration Card, Election Card, Any other Certificate from Statutory Authority) |
| Education Qualifications – Latest Degree | Education Qualifications – Latest Degree (for professionals) |
| Latest Salary-slips for 3 months | Certificate & Proof of business existence along with Business Profile |
| Form 16 for last 2 years | Last 3 years Income Tax returns (self and business) with Profit & Loss Account & Balance Sheets duly certified/audited by a Chartered Accountant |
| Last 6 months Bank Statements (salary account) | Last 12 months Bank Account Statements (self & business) |
| Photocopy of Title Documents of the Property, Approved Plan | Photocopy of Title Documents of the Property, Approved Plan etc. |
Some important points one must note as regards mortgage loans.
- Lenders may charge a mortgage loan processing fee of up to 1.5%.
- Interest rates may differ for salaried and self-employed professionals. There can also be differences based on the credit score, even though the loan is issued with the property as a collateral in every case.
- One must remember to pay the loan instalments promptly lest there will be penal interest
- Loans may be available for tenures generally as long as 20 years and in some cases, 25 also
- Lenders usually allow pre-payment (closure) of the loan ahead of the loan term completion. They may also allow partial payments at certain intervals. However, to compensate them for the loss of interest on the remaining term, lenders may charge some percentage or amount on the outstanding loan amount.