The pandemic has hit the world economy hard, including India. COVID-related restrictions have caused significant disruption to economic momentum, forcing the Reserve Bank of India to lower the benchmark interest rate to record lows. Remote work has become the new norm, creating the need for space. With interest rates at historical lows on various loan products, such as housing or mortgage loans, the time is ripe for locking into big-ticket and longer tenor loans. As a result, the prevailing market conditions will likely prove to be a boon not just for the housing market, banks, but also for housing finance companies.
There is no better time for individuals to avail themselves of a housing or mortgage loan to reap benefits of low-interest rates and use the funds to fulfil requirements like sponsoring a child’s marriage, clearing business debts, emergency medical expenditures, etc.
Here is what you need to know about mortgage loans.
Know About Mortgage Loan?
A mortgage loan is a secured loan that can be availed of by any salaried or self-employed individual by pledging their property as collateral to the lender. The property for a mortgage can either be residential or commercial. Many borrowers opt for a mortgage loan as these loans have a repayment tenor of up to 20 years and relatively lower interest rates than those offered on typical unsecured loans.
A mortgage loan is most useful in a scenario when the borrower requires relatively large sums of money. Such a loan can be availed of for either of the listed reasons: paying for a child’s marriage, emergency medical expenses, expanding business, and financing a child’s higher education. The loan amount eligibility is determined by the loan to value ratio (LTV) offered by lenders and can range between 70% to 80% of the market value of the property.
Mortgage Loan Interest Rates and Mortgage Loan Calculator
The pandemic-induced slowdown has led to a significant easing of monetary policy by the Reserve Bank of India, in the form of low benchmark interest rates, making it an ideal time to lock in into a home loan or mortgage loan to fulfil life goals. In the case of a mortgage loan, the borrower pledges their immovable asset to the lender, which in turn, reduces the risk for creditors. As a result, a lender can offer more competitive mortgage loan interest rates. But remember, in the event, the borrower fails to fulfil his/her debt obligations, the lender enjoys the right to recover funds by auctioning the property.
Mortgage loan interest rates vary for commercial and residential properties. Many other factors also affect the interest rate for mortgage loans. These factors include factors, such as the age and location of the property, the applicant’s income profile, credit score, etc.
The interest rates on the loan vary from lender to lender. Hence, it is better to check the rates with different lenders before shortlisting a creditor. To make the process easier, one can take the help of a mortgage loan calculator.
A mortgage loan calculator is an online tool freely accessible on various websites for computing your monthly equated instalments (EMI). These calculators help you make an informed decision by letting you choose the right mix of the loan amount, tenor, and interest rate.
To check the EMIs on the mortgage loan calculator, one needs to input details such as:
- The required loan amount
- The tenor for repayment of the loan
- Interest rate offered by the lender
After you input these fields on the tool, the calculator will compute the borrower’s monthly liability for the opted loan tenor. The calculator helps you to pick the right mix of loan amount and tenor to arrive at an EMI that fits.
Steps to Apply
With work from home, the new norm amid safety concerns during the pandemic, banks, and housing finance companies have further strengthened and streamlined their processes to make online application, approval, and disbursement seamless.
Based on your loan requirements, select a lender who not only offers low interest rate, but also overall better terms & conditions. Before applying, verify your eligibility criteria for the loan, to get an understanding. You can even add a co-applicant to increase your eligibility.
To apply for a mortgage loan:
- Fill an online application form by entering personal, employment, income details, and your loan requirements.
- Once submitted, a bank representative will get in touch with you to verify all the details mentioned in the form.
- Based on your eligibility, the lender will offer the terms of the loan.
- After the initial process, the lender will ask you to submit documents related to the property, income tax documents, and other income proofs.
- On submission of the property documents, the lender will evaluate the same for legal and technical verification. Once these are verified the lender will approve your loan application.
- The original documents of the property will remain with the lender until the repayment of the loan.
- The lender will issue a sanction letter and disburse the payment.
Now that you know everything there is to know about mortgage loans, make your application if you need funds immediately.