Mortgage loans are secured loans. Approved against immovable assets, these loans involve a security. This security, which is either a commercial or residential property, reduces the risk involved for the lender in lending the borrower the desired money. Therefore, banks and NBFCs offer loans against property or mortgage loans at nominal interest rates.
Mortgage loans come with several benefits for borrowers, such as low interest rates, long repayment tenor, and zero end-use restrictions with regards to fund usage.
Though many banks and NBFCs offer loans against property, sometimes getting approval can be tricky. To increase one’s chances of loan approval, one must know and sincerely work on the factors that affect mortgage loan approval in India.
Look at some of the factors that affect mortgage loan approval in India:
Debt-to-Income Ratio Factor
If you have availed of too many loans, a significant portion of your income must be going towards repaying instalments of these loans. When borrowers apply for a mortgage loan, lenders check their debt-to-income ratio before approving the loan.
One’s monthly loan instalment obligations must not exceed 50% of one’s monthly income. Maintaining this debt-to-income ratio gives a borrower an edge and boosts their chances of online mortgage loan approval. Before making an application, pay off smaller loans and credits and strengthen your debt-to-income ratio.
Borrower’s Income Profile
The total monthly income of the applicant plays a huge role in deciding one’s chances of loan approval, even in the case of a mortgage loan where one provides an immovable asset as security.
If your monthly income does not support the loan amount you wish to avail of, you can club all your income sources and show them in the loan application. This will convince your lender that you can pay EMIs on time. Strong repayment capability is a major factor in loan approval and strengthens loan approval chances.
Income Stability
Whether you are self-employed or a salaried individual, lenders will assess your income stability before sanctioning you a loan. Stable employment works in favour of the applicant. If you are planning to apply for a loan against property, you should not frequently switch your jobs. For self-employed individuals, lenders go through the history of the business. Until lenders feel sure that the borrower has a steady source of income, they do not approve the application. Generally, borrowers require self-employed individuals to be in the business for five years or more to be considered eligible for a loan against property.
Age of the Applicant
Loan against property is available only to Indian nationals. Lenders also consider the age of the applicant before approving a loan application. Majority of the lenders accept applications only from applicants who are 21 years or above. The maximum age can be up to 75 years. Borrowers must also know that the maximum age is the age considered at the time of loan maturity and that borrowers offer their best loan deals to individuals who are young and have many working years ahead of them.
Credit Score
A good credit score is a major factor in mortgage loan approval. Lenders look at the credit history of the applicant. A good credit score indicates that the applicant has been responsible towards loan repayment in the past. This sincere financial behaviour assures lenders about the repayment of the loan. On the contrary, a history of loan default and late payment in terms of EMIs makes lenders wary and leads to rejection of loan against property applications.
Property Type and Age
The property being pledged to avail of a loan should be in good condition. If the property has been built recently, lenders give additional weightage to the application. The location of the property also matters. Properties located in posh areas make loan approval easier. Lenders also do not want any property ownership dispute. If the property ownership is not clear, your chosen lender will most likely reject your loan application.
Property Documents
Lenders ask for the documents of the property being mortgaged. All the documents of the property must be in order. These include approvals from relevant authorities, deeds, and so on. Your chosen lender will not proceed with the application in the absence of all the required documents.
Apart from the above-mentioned factors, know that documentation is key in case of loan applications. You must submit all the necessary mortgage loan documents checklist if you want to experience a hassle-free loan process. The list of required documents varies from lender to lender. So, check the document requirements before beginning the loan application process.
A loan against property is suitable for meeting emergency financial needs. Compared with other loans, mortgage loans attract a lower interest rate. Also, you can avail of a mortgage loan for a longer period. The flexibility of repaying the loan over a long period gives borrowers the chance to easily pay off the loan and in instalments that they can manage. Considering all the benefits of mortgage loan, a loan against property can become an ideal choice for those looking to avail of funds to take care of a financial emergency.
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