There are various types of loans available as per the borrower’s requirement. Loans are primarily categorised into home loans, personal loans, mortgage loans, SME loans, etc. Out of them, a mortgage loan is a type of secured loan as the borrower would pledge a property to the lender as a mortgage, therefore the name mortgage loan.
The financial institutions prefer such loans for their secure nature and no wonder; the interest rates are comparatively lower than the unsecured loans. Also, the tenure of a mortgage loan can go up to 15 years. There are a few critical factors that you need to know before availing a mortgage loan.
Things to Know Before Availing for a Mortgage loan:
Assessing your repayment capacity:
To be pre-approved for a mortgage loan, the first thing you need to know is to determine your flow of cash and repayment capacities. Your repayment capacity is dependent on two factors – your current income and FOIR. FOIR refers to the current income sent out of the bank account in proportions as EMIs. In other words, if your EMI exceeds more than 50% of your monthly income, then the lending institutions can get apprehensive about approving your mortgage loan application. Hence you need to keep your monthly EMI payments at a minimum so that you can have hassle-free loan processing.
Knowing the eligibility:
There are multiple eligibility calculators available online which can help you understand various details like loan amount, rate of interest, tenure etc. Such a practice will enable you to know the details of the mortgage loans in a better way to avoid any bottlenecks in the process. Your loan advisor will be the best person to brief you on the mortgage loan interest rates and the other details which will decide on the loan approval.
It is needless to say that your credit score is the primary factor which decides on your pre-approval process for a mortgage loan. It is crucial to have a higher credit score to avail a quick loan with less rate of interest. A low credit score would not instil confidence in your lender, and they will take a longer time to evaluate your property and make additional checks that were not necessary earlier. Hence it is imperative to repay your existing debts on time and keep your credit score higher.
Both, the salaried and self-employed, can take a mortgage loan, and appropriate documents to submit like income details, IT returns, KYC documents, financial statements, property documents, and so on. The lending institution will determine the loan amount after evaluating the property and credit history of the borrower. Once the loan is processed, the amount will be credited to the borrower’s account.
Choosing the right financial partner:
Mortgage loans are one of the most critical financial instruments as the property of the borrower will be under the title of the lender until the loan repayment. Hence, it would be best if you find a financial institution that can meet your requirements as well as provide you with the best mortgage loan interest rates, tenure and other details. Banks and NBFCs would take some time to evaluate your property before approving the loan and hence you need to find a reliable financial partner so that you do not face any issues with the entire process.
Due to their secure nature, multiple banks and NBFCs provide mortgage loans for the benefit of those who require funds and look out for lesser interest rates. However, if you are aware of the best practices of the loan application, it becomes easier for you to avail such loans in a shorter period.