All You Need To Know About Mortgages

All You Need To Know About Mortgages

All You Need To Know About Mortgages

The home you are about to buy is possibly the most expensive things you will ever buy. Before the lender asks you for a mortgage, make sure you know the process inside out.

Most homebuyers/debt seekers confuse 'mortgage' with 'home loan'. Being a prospective home loan/mortgage borrower, you must get the terminology very right.

A mortgage is a loan to finance the purchase of your house, obtained through giving a conditional ownership of the property you own. On the other hand, home loan is the debt you incur when you are about to buy a house.

MakaaniQ tells you what mortgages are:

What is a Mortgage?

A mortgage is a loan taken to buy a property or a piece of land. Mortgages are given for a period of 15-20 years (the tenure/loan period varies from lender to lender). The loan is secured against the value of your home until the principal and interest of loan are fully paid. If do not repay the loan periodically, the lender can retain the possession of your home. If you default on repayment, lenders have the right to sell off the property to get their money back.

The most common types of mortgages offered by lenders are -

  • Loan Against Property (LAP)
  • Loan Against Property- Overdraft (LAP-OD)
  • Loan Against Rent Receivables (LARR)
  • Reverse Mortgage Loan (RML)
  • Loan Against Property- Interest Saver (LAP- IS)

What is the primary objective of mortgages?

  • To address the short and long-term financial requirement of borrowers having self-owned residential or commercial properties
  • To provide financial assistance available under various mortgage products that cover a range of requirements like business expansion, medical exigencies, education and children's marriage.

Who can avail of the mortgage loan?

Mortgage loans are taken by individuals, salaried employees, self-employed, proprietary firms, partnership firms, professionals, and businessmen. Persons who are the co-owners in the property against which the mortgage loan is taken have to be co-applicants of the loan.

Why is legal and technical verification required in mortgage loans?

  • Legal verification is mandatory in mortgage loans to assess the legal viability and marketability of a property
  • To check for a valid title of the property (i.e. title search report and chain of ownership)
  • Different types of property titles like freehold, leasehold, power of attorney etc. are evaluated for each title
  • Technical verification is done to ascertain the market value of the property.
  • Banks and financial institutions fund a fixed percentage (not more than 60 per cent, with exceptions in some cases) of the market value of the property as the mortgage loan amount
  • It is crucial to keep records of all the property documents while applying for a mortgage loan because the loan analysis will include a close scrutiny of the ownership documents


What is the essence of mortgage of properties?

The mortgage of property can be recognised only when the following are established

  • Transfer of interest in the immovable property (like land, building etc.)
  • The immovable property must be specific
  • The consideration of mortgage is to secure the payment of debt which results in financial liability

Quick Mortgage Pro-tip

  • Know your options while choosing mortgage
  • Get advice from an expert for more clarity on ownership documents and transfer of title
  • Compare mortgage products on various websites
  • Make use of the mortgage calculator
Last Updated: Fri Sep 02 2016

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