A wide array of mortgage loan options cater to varied borrower needs and pocket sizes. However, selecting the appropriate financing solution could make all the difference between struggling financially and attaining life goals. Mortgage loans are the most popular form of credit because one can obtain substantial sums at lower interest rates with flexible repayment terms. Let us examine the different types of mortgage loans offered in India so that borrowers may make confident choices. 

What Is a Mortgage Loan?

Any loan availed by pledging a self-owned fixed asset as collateral is a mortgage loan. It entails placing a residence, land parcel or business property with lenders as security. The big-value real estate acts as a safeguard against potential defaults. 

Types of Mortgage Loans in India

Lenders in India mainly offer the following kinds of mortgage loans:

Loan Against Property (LAP)

Borrowers may pledge residential or commercial units to gain property loans at attractive loans against property interest rates. Continued property utilisation during loan tenor and end-use flexibility are the key highlights of this credit feature. 

Commercial Purchase Loan

Business enterprises can buy commercial complexes, offices, warehouses, etc. under this facility. The loan terms, interest rates and eligibility requirements vary due to the specific nature of this loan.

Lease Rental Discounting 

In lease rental discounting, the lease period and agreement terms are used to calculate the loan amount, while the monthly rent serves as the EMI. The rental yield and borrower profile are closely verified to ascertain the mortgage loan interest.

Second Mortgage/ Top-Up Loan

Borrowers already servicing a mortgage can avail of additional funds with a second mortgage or top-up to manage any housing-related expenses. Your mortgage loan eligibility will be determined by the property’s current price, interest rate and outstanding loan amount.

Reverse Mortgage

A reverse mortgage works well for senior homeowners, who have no reliable income sources. The property is retained as collateral in exchange for consistent monthly payments from the lender. 

Housing Loan

Home loans address all your housing needs such as buying a plot or ready-to-move house, remodelling, repairs and more. The money thus borrowed cannot be used for any other purpose.

Need-Based Mortgage Loans 

Lenders may extend certain mortgage loans depending on borrower requirements, which are:

• Simple mortgage: A popular mortgage loan, where borrowers and lenders agree to the former’s right to property possession until repayment completion. 
• Usufructuary mortgage: Here the lender receives asset ownership and the rent/profit, absolving the borrower of further debt.
• English mortgage: In this instance, borrowers hand over the property to their lender once the loan is obtained. They get it back after the debt has been fully repaid. 
• Conditional sale mortgage: It is comparable to an English mortgage, except lenders may sell the property only in case of borrower default. The sale transaction is contingent upon future developments. 
• Mortgage of title deeds deposit: Here the borrower gives the lender title deeds of the property in exchange for a loan.
• Anomalous mortgage: Anomalous mortgage defies classification and does not fit any mortgage type.

Interest Rate-Based Mortgage Loans 

The mortgage loans mentioned below are categorised per the type of interest rate:

• Fixed-rate mortgage: The interest rate remains unchanged for the entire tenor, ensuring security and predictability in EMI payments. 
• Floating rate mortgage: A variable interest rate mortgage is subject to frequent adjustments according to fluctuating market conditions. 

Exploring Mortgage Loans: Find the Right Fit 

Mortgage loans are a long-term financial commitment spanning decades. Hence, align the available choices with your credit needs after carefully weighing the pros and cons. Remember these key factors when comparing loan alternatives: 

• Your present and future earning potential 
• Other debts, commitments and regular expenses
• Loan quantum that you can comfortably repay 
• Property value 
• Your credit profile and risk tolerance

Summing Up

Lenders run comprehensive eligibility checks before accepting loan applications. Your credit records and financial stability will help them decide the loan principal, interest rate and applicable terms on offer. Property specifics too play a significant role in assessing the mortgage amount based on its condition, location, size, amenities, compliances, connectivity, etc. You may access a land area calculator to ensure fair pricing by validating property size and market value before applying for the loan. In addition to an area calculator, several other online tools such as an EMI calculator, eligibility calculator, etc. will prove beneficial in establishing mortgage loan eligibility and affordability. This way, you may identify the associated credit risks and strategize realistically.