A large expense can occur at any time, and if you do not have enough savings to tackle such a massive financial undertaking, it can become quite problematic and stressful. However, if you own a residential or commercial property, you can pledge that property with a lender as collateral to gather the funds that you need at a marginally low rate of interest, and you will receive a sizeable amount so you can take care of any big-ticket expense without any hesitation and this type of loan is known as a loan against property or a mortgage loan.
The process of applying for a property loan is simple and easy to understand, and it has been refined to the point where anyone can apply for a property loan without hesitation. Here are five simple steps to follow when applying for a mortgage loan:
CIBIL Score
Your CIBIL score is an important factor to consider because a lender will conduct a background check that will include your past and present financial records to determine if you have ever defaulted on your EMIs and to check your credit rating. A CIBIL score of 750 or higher will qualify you for favourable lending terms such as large sanctions, longer tenors, lower rates of interest, and quick approval.
Documentation
The most important factor is the documentation you must submit to the lender because it can make or break your loan application. You can expect a quick disbursement and approval if all of your documentation is in order and complete according to the lender’s requirements. Having all of your documents in order can also help you improve your property loan eligibility criteria.
Loan-to-Value Ratio
After you have submitted the application form and all required documentation, the lender will conduct an inspection of your property to determine its current market value. A residential property will have a higher resale value than a commercial property, and if it is located in a desirable neighbourhood, is relatively new, and well maintained, you can receive a higher LTV.
Sanction Letter
Once the lender has approved your loan application, they will send you a sanction letter outlining all of the loan’s terms and conditions, which you must read in order to understand the details of your mortgage loan. The lender will begin the loan disbursement process once you sign and submit the sanction letter.
Tax Benefits
Although mortgage loans are not known for their tax benefits, this does not mean that you cannot benefit from property loan tax benefits. A borrower may claim a tax deduction under Sections 24(b) and 37 of the Income Tax Act (1).
