What Is a Mortgage Loan? Things You Need to Know About It
Do you want to buy a property or raise funds for financial emergencies? Consider taking a mortgage loan!
A mortgage loan is highly suitable for borrowers in need of contingent funds. Therefore, you can avail this loan amount for financing a wedding, education, medical emergencies, etc. Moreover, salaried employees, self-employed individuals, businessmen, etc. can borrow a mortgage loan quickly.
Here’s everything you need to know about a mortgage loan.
What Is a Mortgage Loan?
A mortgage loan is a type of secured loan borrowed against collateral – usually an immovable asset like your house, a non-agricultural land, or commercial property. The lender provides a principal loan amount and levies an interest rate on it. You can repay the mortgage loan using affordable monthly instalments or EMIs.
Your asset remains in the lender’s possession until the entire loan amount is repaid in full. Besides, the lender reserves a legal claim over your asset for the whole loan tenure. In case of a payment default or a violation of the loan agreement, the lender can seize your property and sell it.
You can take out three types of mortgages –
- Home Loan
- Loan against property
- Commercial property loan
Borrowers can get a home loan only to buy a residential property or a commercial loan to buy a commercial space. But, there are no end-use restrictions on loan against property. You can use the availed amount to fund medical emergencies, a vacation, education, a wedding, and more.
Key Features of a Mortgage Loan
Following are the salient features of a mortgage loan –
- Home Loan Interest Rate – A mortgage loan is available in both fixed and floating interest rates. For a fixed interest rate, you pay a fixed EMI amount until the loan tenure is over. Meanwhile, for a floating interest rate, the interest outgo on your EMIs depends on the prevailing lending rate.
- Loan Amount – Lenders check your income and your property’s market value to determine the loan amount you are eligible for. However, you can avail a mortgage loan amount higher than 60% of your property’s market value.
- Collateral – Lenders usually follow strict criteria for collaterals. In truth, not all properties or real estates are accepted as collateral. For instance, lenders usually accept an entirely constructed, freehold house or commercial property as collateral.
- Loan Disbursement – Once your mortgage loan application is approved and sanctioned, the lender will disburse the borrowed loan amount directly into your bank account.
To Sum Up
Now that you know ‘what is mortgage loan’, decide a loan amount based on your financial health and repaying capacity. Gauge your fund requirements, eligibility criteria, and an available asset to take a suitable mortgage loan plan.
Are you looking for a mortgage loan? Use our home loan EMI calculator to estimate the EMI payments towards your stipulated loan amount.