Before we get to the different property types to avail of a mortgage loan, let us understand what is a mortgage loan. A mortgage loan is a type of secured loan under which a borrower pledges their residential or commercial property as collateral in return for loan money. Since these loans are secured in nature, mortgage loan interest rates tend to be on the lower side. Further, borrowers extend these loans for longer repayment periods stretching up to 20 to 30 years. Let us now look at different types of loans against property available in India.

Commercial Purchase Loans

Commercial purchase loans are loans that businessmen and entrepreneurs take to buy commercial property, such as a shop or an office space. However, while loans against property funds usually come with zero end-use restrictions, borrowers can use commercial purchase loans only to buy commercial property.

Lease Rental Discounting

Lease rental discounting refers to the process of taking a loan against a leased property. Lenders decide the loan amount to be sanctioned based on the rent amount drawn by the borrower and the tenor of the loan depends on how long has the property been leased.

Second Mortgage Loan

Second mortgage loans are also known as top-up loans. These are loans taken by borrowers against a property against which they already have another loan. The lenders decide the value of the top-up loan as well as its rate of interest based on how disciplined and punctual the borrower has been.

Reverse Mortgage

The reverse mortgage is a special type of loan that lenders have introduced only for senior citizens. Under this type of loan offer, seniors who own a property pledge their property to the lender. Based on the value of the property, the lender decides an EMI amount that the lender will pay to the senior citizen who owns the property each month. Once the senior citizen passes away, the lender sells the property for loan recovery. They keep the amount that they paid to the senior citizen and the remaining amount is given to the legal heirs of the deceased.

Home Loans

Home loans are a type of mortgage loan under which a borrower pledges the property they have bought with the loan money as collateral. Home loans are the cheapest of all loans.

Loans Against Property

Loans against property are a type of secured loan under which a borrower pledges a residential or commercial property as collateral. The owner of the property continues to have ownership rights over it through the tenor of the loan. However, the lender can sell the property for loan recovery in case of loan default. The money comes with zero end-use restrictions.

Based on the type of property mortgaged, loans against property are of three different types: loan against residential property, loan against commercial property and lease rental discounting. Based on the borrower’s employment type, loans against property are of two types: loans against property for salaried individuals and loans against property for self-employed individuals. Further, based on usage, lenders sanction three different types of loan against property.

Those planning to avail of a loan against the property must use a loan against property EMI calculator as these loans involve collateral and the borrower can sell the collateral for loan recovery in case of loan default. Thus, one must use a loan against property EMI calculator to figure out the loan amount they can afford to borrow and repay each month and borrow only this amount or something lower.