Discover the Different Kinds of Mortgage Loans Available In 2023

HomeFinanceDiscover the Different Kinds of Mortgage Loans Available In 2023

A mortgage loan is one of the easiest ways to meet financial shortages. Individuals can get credit assistance by keeping their properties as security. Due to these low-risk factors, they also get mortgage loans at a comparatively lower interest rate. Nevertheless, there are several different kinds of mortgage loans that individuals can leverage to get financial assistance.

What is a Mortgage Loan?

A mortgage loan is a credit facility that lets individuals borrow by keeping a property as collateral. Borrowers get the money directly into their savings accounts. They can utilise the amount they prefer since it comes with zero restriction of end-usage. Furthermore, being a secured credit facility, the interest rate of mortgage loans also remains lower than in unsecured kinds of loans.

Nevertheless, there are several kinds of mortgage loans available in the market. By staying informed, individuals can ensure that they can easily get the necessary credit access from financial institutions whenever required.

What are the Kinds of Mortgage Loans?

Following are different kinds of mortgage loans one can choose from:

English mortgage loan

An English mortgage is a financial agreement of lending in which individuals give consent to transfer the collateral if they fail to repay the debt on or before a certain date. However, this is not a permanent transfer of ownership. Further, the right to possess the property remains with mortgagees. The lending agent will re-transfer the mortgaged property if borrowers repay the full loan amount.

Usufructuary mortgage loan

In a usufructuary mortgage loan, borrowers agree to hand over their commercial or any other property to lenders for up to a specific period. However, borrowers do not get any financial obligations. In other words, they do not have to pay instalments for the loan.

In this contract, the lenders get the right to leverage the mortgaged property for their financial gains up to a certain period. However, they cannot modify or harm the property by any means. 

Fixed-rate loans against property

In this type of loan against property, individuals get a fixed interest rate for repayment. As a result, individuals’ debt obligations remain the same throughout the repayment period. The instalment amount stays unaffected even though the current market interest rate for the loan fluctuates. Borrowers can easily do financial planning to repay the debt.

Floating rate loans against property

It is quite the opposite of fixed-rate loans against property. The interest rate of the debt keeps changing according to its base rate. As a result, the instalment amount also fluctuates. Still, it can benefit borrowers since the interest rate stays lower than fixed-rate mortgage loans. 

Fixed and floating-rate loans against property are two of the most common kinds of mortgaged debt. Individuals can easily get these credit facilities from lending institutions in India. Nevertheless, before borrowing, they should also clearly understand the differences between fixed and floating rate LAP and which to opt for at a particular time.

How to apply for a fixed or floating rate Mortgage Loans

Here are some steps that individuals will have to follow to apply for loans against property:

Step 1: Visit the financial institution’s official website

Step 2: Access the loan against the property page 

Step 3: Enter personal and property information as required

Step 4: Fill in the application form with professional and income details

Step 5: Submit the filled-in application form 

With this, individuals will successfully complete their application process. In this regard, they also need to be aware of a few things to know before applying for a mortgage loan online.

Furthermore, there are several lending institutions in India that provide pre-approved offers to their existing customers. Customers can leverage these special offers on financial products like home loans and loans against property. It quickens the loan application process. Intending customers will have to simply mention their names and contact details to check their pre-approved offers.

Since a mortgage loan is a secured credit facility, individuals do not face much difficulty in getting the required financial assistance. Among the several kinds of mortgage loans, as mentioned, individuals can only get loans against property from conventional financial institutions in India. English and usufructuary mortgage loans do not come under the regulation of RBI.

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