Over the years, mortgage loans emerged as the fastest-growing segment among personal loans. It is because one can easily borrow significant funds by putting a property as collateral. It also has easy documentation, flexible repayment options, and speedy approvals. Moreover, the funds by mortgage loan can be used for financing business as well as personal needs.
What is a mortgage loan?
A mortgage loan is a loan where you get funds by providing your asset to the lender as collateral. The loan is sanctioned against an immovable asset like a house or some other type of property. The lender keeps the asset with him as collateral until the borrower repays the loan amount.
Prerequisites for taking a mortgage loan
The eligibility for loan against property include-:
- Steady Income: For taking a mortgage loan, your income must be sufficient enough to afford the loan. Also, your income must be consistent as not all types of income will be accepted by the lender. It is to ensure that you have a sufficient amount to pay the loan amount.
- Down Payment – Down payment is an amount that you are required to pay in the beginning in cash. Different lenders require different down payments.
Factors to consider while taking a mortgage loan
Before you apply for a loan against property, it’s essential to look at some critical factors-:
- Loan terms– The loan term can be short term or long term. Short-term loans have lower interest rates, but higher monthly payments, whereas long-term loans have higher interest rates but lower monthly payments. So, short term loans have a lower total cost, whereas long term loans have higher overall costs.
- Interest rates– loan against property interest rate vary between 8.75% to 13.35% depending upon the lender. You also have an option to choose between fixed or adjustable interest rates. Usually, Mortgage loans charge lower rates of interest as compared to other loans.
Can mortgage loans be taken to fulfill business needs?
Yes, mortgage loans can be taken to finance business needs. You can get this loan for your business expansion, buying capital assets, purchasing a new property, machinery or equipment, etc. Lenders do allow mortgage loans for using it for business purposes. However, it’s also important to note that different lenders may have different terms related to financing business through a mortgage. For instance, some lenders won’t offer mortgage loans for companies that are involved in property developments. Therefore, before availing the loan, you must check the terms of the loan and whether they allow you to cater to your needs or not.
Can mortgage loans be taken to fulfill their personal needs?
Yes, the mortgage loan can be used for personal needs such as for your children’s education, marriage, holiday, medical expenses, etc. Unlike mortgage loans for business purposes, for personal needs, the lenders don’t put any bar on specific reasons. However, you must read the terms and conditions carefully. As such, you can quickly get a mortgage loan for any personal purpose.
Funds that you receive from mortgage loans can be used for business as well as personal requirements. Though for catering business needs, there are certain restrictions by some lenders, that’s not the case with fulfilling the personal needs with the mortgage loan. Therefore, if you want to finance individual or business needs with mortgage loans, you can do it without any hesitation.