The term ‘mortgage’ suggests pledging something as security in exchange for something. Thus, a mortgage loan can be defined as an advance where a property or asset is pledged as collateral in exchange for funds. Such loans are secured advances because the loan amount is disbursed against a hypothecated asset. The property or asset being used as collateral must have a market value, based on which the loan is sanctioned.
Property loans usually have a longer repayment tenure as compared to other credit options. Borrowers are allowed a span up to 20 years so that they can repay the acquired amount conveniently. As long as the loan principal is not entirely cleared by a borrower, the lender holds the title deed of the particular property.
Features of a mortgage loan
Funds availed against a mortgaged property come with certain features which a borrower must be aware of. Have a look -
Loan against property interest rate is generally lower owing to their secured nature.
Additional fees such as statement charges, processing fees, penal interest, etc. could also be levied on a loan against property. Borrowers must, thus, be careful to opt for lenders who levy zero or minimum charges.
These loans can be partly prepaid and foreclosed as per the convenience of a borrower. There are no additional charges on foreclosure of mortgage loans.
Mortgage loan do not come with end-use restrictions. The loan is sanctioned after thorough verification of the applicant’s eligibility alongside the property details.
This allows borrowers the freedom to utilise the funds to meet any number of financial requirements. This might include education, travel, medical, or even business expenses.