Mortgage Loans: Here are Some Common Misconceptions

Dev Singhraha

Relocation Expert

Mortgage loans are not that popular among borrowers but they are the cheapest financing options as compared to personal loans. This is due to several common misconceptions that discourage customers from applying for mortgages.

So let’s know about such misconceptions to avoid them.

Misconception1:

Only residential property can be put on mortgage: There is a common perception that the mortgage loan can be only secured in lieu of residential real estate only, which is wrong. Rather a mortgage loan can be secured in lieu of commercial real estate also. When anyone puts a residential property as a security, he or she can either offer their current or pre-occupied residential property or any other residential property which is not pre-occupied as the security. Plots can be also included as security. However, financial institutions insist on commercial projects that ask for mortgages rather than offering non-commercial plots as security for the mortgage. But commercial properties come with a higher margin which converts into the sanction of a lesser amount for the loan.

Misconception2:

Loan amount to be sanctioned depends on the original price of the property: Banks or financial institutions evaluate the loan amount based on their pre-conditioned standards and formulae. Based on the circle rate of the area, the age of the property, it’s present condition and many other aspects, the rate of evaluation is standardised. This implies that the original price of the property has nothing to do with the loan against property.

Misconception3:

After the loan gets sanctioned, the possession goes to the bank: This misconception has arisen due to the trend set by the gold-loaners who takes possession of the gold while sanctioning and transferring the loan to the borrowers. But this is not the case when a loan is taken against a property. Due to this reason only, owners can put down their current occupied home as security against loan without fearing of eviction. Herein the lenders do not take any move against the property owner unless the duration for which the money has been lent gets over and the outstanding amount is not repaid.

But the property papers remain with the lender at the time of loan sanction so that the property owners do not go for any kind of loan or sale for the same mortgaged property. The borrower gets back all the papers after all the dues have been paid and settled.

Looking for property portal?

Find a property Post property

What is a Loan Against Rentals?

Loan against rentals is the mode through which home buyers can take a loan from housing finance institutions against future rentals income. Almost all the public sector banks and finance institutes give out a loan against future rentals for their pro...

May 18, 2017
Difference Between Mortgage Loan And Home Loan

it’s been quite a many times that people come across the terms mortgage and home loan. They confuse the two and often are seen using the terms interchangeably; however both the words are completely different from each other. Let’s have a look ...

May 25, 2017
Is It Possible to Get a Home Loan With Future Rental Income

For salaried employees, it is easier to get the home loan approved and buying the dream house. However, the same is not the case for self-employed and businesspeople. To make sure the loan they lend to the self-employed borrowers, is returned, the ba...

Sep 10, 2019
Know How To Apply for A Subsidy Under PMAY Online

The Pradhan MantriAwasYojana (PMAY) is an initiative that has been taken by the Government of India for affordable housing loan facilities, which could be availed by the urban poor class. This is one of the most ambitious housing schemes that has bee...

Nov 10, 2018