Loan Against Property: Know All About Eligibility Criteria, Documentation, Procedure

Loan Against Property, popularly known as LAP, is the loan against the mortgage of the property. LAP enables home loan borrowers to unleash the power of the immovable property i.e. their house.

If you want to expand your business, or is planning an expensive wedding for your daughter, you can take a loan against the mortgage of your property to arrange funds.

MakaaniQ tells you how to apply for Loan Against Property (LAP).

What is the primary objective of LAP?

• To address the short-term and long-term financial requirement of home loan seekers having self-owned residential or commercial property
• Financial assistance available under the LAP product covers a wide range of requirements like business expansion, medical exigencies, child's education, and short-term funding mismatches (other than the speculative activities).

Who can be the applicants and co-applicants in LAP?

• All co-owners of the property (against which the LAP is taken) must mandatorily be the co-applicants in the LAP.
• Individuals, Sole Proprietors, Partnership firms, Limited company, Societies registered under society acts, and Companies not for profit can be the main applicants in the home loan.
• The age of salaried applicants or co-applicants can range from 22 to 65 years of age/age of retirement, whichever is earlier (the number can vary from lender to lender)
• The age of self-employed people may range from 25 to 65 years of age.

What types of property can be mortgaged for LAP

• Self-owned residential property
• Self-owned and self-occupied residential property
• Self-owned but rented residential property
• Self-owned piece of land
• Self-owned commercial property
• Self-owned but rented commercial property

What types of property are not to be funded for LAP?

• Vacant plot
• Properties funded by co-operative societies
• Cinema halls/ Cold storage or warehouses/ Industrial sheds
• Agricultural land and building
• Under Construction Properties

What are the norms related to property for LAP?

• Property Insurance is mandatory
• Property must meet the 'minimum area' stipulated by banks, which is different for residential and commercial properties
• Lenders have stipulated norms governing minimum market value of the property for metro and non-metro cities
• Assessment of the market valuation of the property for LAP is done based on the technical report of the empaneled valuator
• If LAP is for Rs 50 Lakh or above (loan amount can vary), two technical reports are derived from the outsourced technical agency

What is the Loan-to-Value ratio (LTV) and Fixed-Obligation-to-Income ratio (FOIR) for LAP?

• FOIR is applicable in the same way as in standard home loan norms
• LTV is 70 per cent for residential properties
• LTV is 60 per cent for non-residential properties
• Percentage figures may vary from bank to bank

What are the risks involved in LAP?

• LAP is considered a better way to raise money when compared to unsecured loans like personal loan, if one owns a property
• The downside of LAP is that if the borrower is unable to repay the loan in full, banks and financial institutions can take the possession of the property.
• Opt for LAP only if you are sure that you are financially capable of freeing your property from the chains of mortgage.

What is the interest rate and tenure of LAP?

Interest rates are higher for LAP when compared to home loan interest rates. The tenure is up to 15 years and the interest rate can range up to 16 per cent.

What are the basic eligibility criteria of LAP?

All banks/lenders would look into following criteria-

• Your income, savings, and the number of assets and liabilities
• The market value of the property
• The repayment track of existing loans and credit cards

Also watch: How to get loan against property