A mortgage loan refers to a loan obtained against an immovable asset that can be offered as collateral to avail of the loan. A loan against property (LAP) is one of the most common products under the category of mortgage loans that can offer up to 5 crores as the loan amount. A large sum of money, long repayment tenure, and freedom to use the disbursed amount are among the driving factors for borrowers to apply for a loan against property (LAP).
A loan against property allows individuals – salaried, self-employed, or entrepreneurs to use the value locked up in their property. For a smooth mortgage loan application process, know the complete list of documents required in the post. Before that here is how a mortgage loan works.
How a Mortgage Loan (Loan Against Property) Works
- A LAP loan can be availed of in the organized lending sector against commercial property or residential property. Mortgage loan rates vary as per the property type. Lending institutions charge interest on the collateralized property until the borrower repays the loan completely during the repayment tenure in the loan agreement.
- There is no restriction on the end-use of the amount sanctioned against a LAP loan. Borrowers can use the loan amount for varied purposes, including a child’s higher education abroad, marriage, expanding business, or other financial obligations.
- The lender needs to assess the pledged property’s market value before approving a mortgage loan. The loan amount is offered on the current market value of the property and the borrower’s credit profile. The borrower should be able to provide mortgage loan documents required by the lender.
- The property that the borrower wants to collateralize must be titled in their name. If the property is owned by two or more owners, each owner must be a co-applicant for the loan.
- The borrower continues to retain possession of the property even after pledging it. Lenders allow them to use it as before.
Mortgage Loan Documents Required for Self-employed
Renowned lending institutions have made the application process for a loan against application straightforward and simple with minimal mortgage loan documents required. Find the list of required documents for a loan against property below:
- Duly filled out the Application form with a recent photograph – Lenders need to know the personal details of the borrower. Therefore, they want borrowers to provide the correct information in a LAP loan application form available at their official website. This online LAP loan application must be supported by all documents asked by the lender.
- Identity Proof – Passport/Voter’s ID card/Driving License/PAN (Permanent Account Number)Resident Proof – Ration Card/Telephone Bill/Electricity Bill/Passport/Rent agreement/Bank Passbook/Driving License Age Proof – PAN/Passport/another Government certificate. The age limit is 25-65 years for self-employed applicants.
- Income Proof – Income statements and other financial documents attested by a Chartered accountant for the previous two years
- Banks Statements – Previous six months’ bank statements
- Form 16
- ITR Acknowledgement – Income Tax Return (ITR) for the previous two years
- Cheque – Processing fee cheque
- Property Documents – Submit copies of the title documents and other documents of the concerned property being mortgaged for the loan.
- The lending institution may require other documents for LAP loan processing as per its policy. Self-employed individuals need to ensure that the borrower submits the latest documents to authenticate their personal details, and the property should be free from legal issues.
The lending institution may require other documents for LAP loan processing as per its policy. Self-employed individuals need to ensure that the borrower submits the latest documents to authenticate their personal details, and the property should be free from legal issues.
Mortgage Loan Application Process
- The lender will verify the provided personal details in the application form and submit documents to initiate loan processing.
- Based on property evaluation, the lender will decide on the loan value to be sanctioned for the borrower. Property evaluation may take time as it is a process of extensive verification.
- After successful verification of all personal details, documents, and thorough property evaluation, the lender will credit the loan amount to the borrower’s account. Even after loan disbursement against the property, the property title will remain in the owner’s name.
Thus, self-employed individuals can have a large sum of money to fulfill their dreams without selling or losing ownership of their properties. Reputed lending institutions can offer up to 70% of the property, depending on the type, location, and condition of the property. Customers should check the eligibility criteria for LAP loans minutely before applying with an institution. Loan application rejection leads to a reduced CIBIL score for the applicant.