Loan against Property (LAP), also known as a mortgage loan, lets you borrow money by using your residential, commercial, or industrial property as collateral. It's like taking out a loan where your property acts as security. You can use this type of loan for personal or business needs, but not for speculative purposes. Banks and housing finance companies (HFCs) offer LAP for up to 20 years. The loan amount can be as much as 75% of your property's market value, depending on the lender and your credit history. Some lenders also provide Lease Rental Discounting (LRD), where you can get a loan by using the rental income from your tenants as security.
- Higher loan amount - Lenders generally provide loans of up to 70% of the property value, allowing you to access larger amounts of funds based on the value of your property.
- Longer loan tenure - Banks and NBFCs typically offer longer repayment periods of up to 20 years, which can result in more manageable monthly installments (EMIs).
- Lower interest rates - Because the loan is secured by your property, banks and NBFCs can offer lower interest rates, reducing your overall borrowing costs.
- No end use restrictions - You can use the loan amount for any purpose, whether it's consolidating debts, covering wedding expenses, expanding your business, or any other financial need.
- Higher chances of loan approval - Since the loan is backed by your property, the lending risk for banks/NBFCs is reduced, increasing your likelihood of loan approval, even if your credit history isn't perfect.
- Overdraft facility - Some lenders offer an overdraft facility with the loan, providing you with additional liquidity at a lower interest cost, giving you more financial flexibility.
| Lender | Interest Rates (p.a.) | Processing Fees |
|---|---|---|
| Kotak Mahindra Bank | 9.15% onwards | Up to 1% of loan amount |
| State Bank of India | 10.60% - 11.30% | Flat Rs 10,000 |
| HDFC Bank Limited | 9.50% - 11.00% | Up to 1% of loan amount (minimum Rs 75,000) |
| ICICI Bank | 10.85% - 12.50% | Up to 1% of loan amount |
| IDFC First Bank | 9.00% - 16.50% | Up to 3% of loan amount |
| Bajaj Housing Finance | 8.50% - 18.00% | Up to 1% of loan amount |
| Bank of Baroda | 10.85% - 16.50% | Up to 1% (Rs 8,500 upfront - Rs 75,000) |
| Bank of Maharashtra | 10.45% - 11.95% | 1% of loan amount |
| Federal Bank | 12.60% onwards | 1% of the limit sanctioned with a minimum of Rs. 3,000 |
| Bank of India | 11.25% onwards | Up to 1% of loan amount (Rs 5,000 - Rs 50,000) |
| Union Bank of India | 10.45% - 13.10% | Up to 1% of loan amount (Min. Rs 5,000 & Max. Rs 1 lakh) |
| UCO Bank | 10.85% - 12.00% | 0.50% of loan amount (up to Rs 2 lakh) |
| Indian Bank | 10.00% - 12.75% | 1% of loan amount |
| Indiabulls Housing Finance | 9.75% onwards | 1% onwards |
| Tata Capital | 10.10% onwards | Up to 1.25% of loan amount |
| L&T Housing Finance | 9.50% onwards | Up to 2% of loan amount |
| LIC Housing Finance | 9.50% - 11.55% | Up to 1% of loan amount |
| PNB Housing Finance | 9.25% - 15.00% | 0.75% of loan amount (Max. Rs 1 lakh) |
Note: Interest Rates as of 15 January 2024
Before you apply for a mortgage loan, you can use MybankingTips loan against property EMI calculator. This tool helps you figure out how much EMI (Equated Monthly Installment) you can afford based on your desired loan amount, interest rate, and tenure. It gives you instant and accurate results, showing you not only the EMI amount but also the total interest payable, total principal payable, and an amortization schedule. This helps you better understand how your loan repayment works and plan your finances accordingly.
Here are some general fees and charges that may be applicable to your mortgage loan:
| Processing Fees | 1% - 2% of loan amount |
| Part Prepayment Charges |
Floating Rate: Nil Fixed Rate: Up to 4% on outstanding principal |
| Penal Interest | Usually at 24% p.a. (2% per month on the overdue installment/s) |
| Foreclosure Charges |
Floating Rate: Nil Fixed Rate: Up to 2% on outstanding principal |
Here are some general eligibility criteria for availing a Loan Against Property (LAP):
- Minimum Age Limit: 18 years
- Maximum Age Limit: 70 years
- Residential Status: Resident Indian and Non-resident Indian
- Minimum Salary: At least Rs. 12,000 per month
- Employment Type: Salaried, Self-employed Professional and Self-employed Non-Professional
- Net Annual Income: At least Rs. 1.5 lakh p.a.
- Work Experience: At least 1 year in the current organisation
- LTV Ratio: Up to 75% of property value
- Credit Score: Preferably 750 and above
- Property Type: Residential, Commercial and Industrial properties are eligible to be pledged as collateral. Lenders will also consider the age and condition of the property before accepting the property as collateral.
- Proof of Identity (PAN Card/ Passport/ Voter ID Card/ Driving License)
- Proof of Age (PAN Card/ Passport/ Any other certificate from a statutory authority)
- Proof of Residence (Passport/ Ration card/ Rental Agreement/ Telephone Bill/ Electricity Bill/ Bank Passbook or Statement/ Driving License)
- Proof of Income for Salaried (Form 16, Latest Payslips, ITR of past 3 years and investment proofs (if any)
- Proof of Income for Self Employed (Details of ITR of last 3 years, Balance Sheet and Profit & Loss Account Statement of the Company/Firm, Business License Details and Proof of Business Address)
- Property-related Documents (Title Deeds including the previous chain of the property documents, approved plan [if applicable], Nil Encumbrance Certificate on the concerned property)
Step 1: Provide basic details such as your mobile number, loan amount, property location, employment type, etc.
Step 2: Compare and apply from the list of offers.
Step 3: Wait for the loan experts to get in touch with you.
1. What is Loan Against Property?
A loan against property is a type of loan where you borrow money by using your commercial or residential property as collateral. You can use the loan for various purposes except for speculative activities. It's a secured loan option because your property acts as security for the lender.
2. Which bank is best for availing loan against property?
When choosing a bank or housing finance company (HFC) for a loan against property, most people look for the lowest interest rate to save money on overall interest costs. However, it's also important to consider factors like loan tenure, the percentage of property value they lend (LTV ratio), processing fees, pre-payment charges (if you choose a fixed-rate loan against property), and how quickly they disburse the loan. These factors can affect your total borrowing experience and should be weighed alongside the interest rate.
3. How does loan against property work?
When you get a loan against property from a bank or finance company, you use your property as security. You pay back the loan over time. If you can't pay back the loan, the lender can take ownership of your property. This is called foreclosure.
4. What is the maximum loan tenure available under LAP?
Usually, the length of time you have to pay back a loan against property is up to 20 years. But different lenders might offer different durations for repayment.
5. What is the eligibility criteria for availing Loan against Property?
Your chances of getting approved for a loan against property mainly depend on factors like your age, where your property is located, its features, how well you can repay the loan, your credit score, your job, and other related factors.
6. Is it mandatory to have a co-applicant for availing LAP?
If the property being used as collateral for a loan against property is owned by more than one person, having a co-applicant is mandatory. In this situation, all co-owners of the property must apply as co-applicants for the loan.
7. What types of properties are accepted by lenders providing Loan Against Property (LAP)?
Different lenders have their own rules about the types of properties they accept for mortgage loans. However, most lenders typically accept residential, commercial, or industrial properties as collateral. It's important to know that the condition and age of the property can also impact whether a lender will accept it as collateral.
8. What is the maximum repayment tenure for a Loan against Property?
Banks and housing finance companies (HFCs) usually give you around 15 years to pay back a loan against property, but some lenders offer longer repayment periods. For instance, Bajaj Housing Finance lets you pay back over 30 years, while Godrej Capital allows up to 25 years.
9. Can NRIs avail loans against the property?
Yes, many financial institutions provide loan against property to Non-Resident Indians (NRIs).
10. What is the difference between Home Loan and Loan against Property (LAP)?
Loan against property (LAP) lets you borrow money by using your residential, commercial, or industrial property as collateral, while a home loan is specifically for purchasing or constructing a new house, or for extending/renovating an existing one.
11. What happens when Loan against Property is not paid?
If you miss paying your LAP EMI, you may face late fees, penal interest charges, and a drop in your credit score. If the loan remains unpaid partially or fully for more than 90 days, it will be classified as a Non-Performing Asset (NPA). This classification may prompt your lender to take recovery actions under the SARFAESI Act, 2002.