Types of Mortgages

The practice of securing loans from a bank or other institutions by lending ownership of land or any other immovable property is known as mortgaging. Home loans also fall under the category of different types of mortgages. Around 70% of the current property value is the loan amount. Mortgage or Mortgage loans is common terminology used by traders, merchants and people in business. The duration and amount of different types of mortgages can be determined as per the requirement of an individual. The mortgage loans are suited for people who do not have initial funds but are confident in the returns of an investment. 

Types of Mortgage Loans

• Loan Against Property

A loan against property or LAP is one of the common types of Mortgage in India. To receive funds, a borrower lends his commercial or residential property to banks or other lending institutions. The original papers of the property are with the lending party until the loan is repaid. The loan can be paid back on an EMI basis, and its tenure can stretch up to 15 years. 

• Loan Against Leased Property

Types of mortgage loans also include loans provided against a leased property. Lease property refers to a property that has been conveyed to another party for a particular period on a contractual basis. Lease properties both of commercial or residential use can be used for mortgages. Here the rent itself can be the EMI amount, and the loan is given on that basis.

• Commercial Purchase

Other common types of Mortgage in India are for commercial purchase. Business people and Entrepreneurs often take commercial loans to buy a shop, office, or additional retail space. The funds received can only be used to buy the mentioned property.

• Home Loan

Home loan is another common example of different types of mortgages. People apply for small, medium or big-sized housing loans with highly competitive interest rates. An individual takes a home loan to construct a new house or renovate an old house for reselling purposes. The funds have to be used explicitly for a house only and not for any other commercial purpose. 

• Reverse Mortgage

A recent phenomenon in India, reverse Mortgage is especially for senior citizens. Senior citizens might not have a steady flow of income but have valuable real estate. The process here is reversed, and the bank pays an EMI to the property’s lender. It helps the older people to have a source of cash flowing in. On the death of an individual, the property is sold to an heir or others, and the EMI amount is deducted from the sold price. 

• Second Mortgage Loan

A Second Mortgage loan can be taken for properties already under a loan. Depending on the borrower’s repayment history, banks and NBFCs grants second loans. The EMI of the second needs to be paid along with the first. Second, Mortgage loans could come under risky types of mortgages. 

Benefits of Mortgage Loans

• Mortgage loans offer flexible tenures.

• Mortgage loans are secured loans and quickly approved.

• An individual continues to be the legal owner of the property that has been lent.
• The interest rate of mortgage loans is much lower than personal loans.

How to Repay Mortgage Loans Quickly

• Frequent Payments

Tenures can sometimes extend from 10 years to 30 years. Do not opt for long terms. If your budget allows, then go for ten years tenure. Calculate your EMI payment and match it with the tenure period. Also, consider other expenses like a child’s education while doing so. 

• Down Payment

Before taking a loan, prepare to make a down payment of 20% of the desired loan. It will reduce the period and also ease the burden. Try and save money beforehand to make a down payment.

• Use Additional Earnings for Payment

One can use a holiday bonus or refund to make instalment payments. It could be a great way to decrease the loan liability. 

Conclusion

Apart from mortgage loans being the safest and easy option to raise funds, they can have severe repercussions in case of payment failure. Failure of the mortgage payment is different from not paying the rent. Calculate your finances well and take a loan that fits your budget.