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About Loan Against Property

Many of us think when it comes to our mind that what is the source of money or from where they get that money in case if they have to finance their children for higher study in abroad or finance their child marriage and maybe they need finance to start their business.

However, there are lot many ways to arrange that money and one of those many ways is to take a loan. Loan against property is the easiest way to get a loan from any financial institution any financial institution would easily give you loan approx 40-60% amount of your property value.

What is a loan against property?

LAP is the short form of Loan against property, as the name suggests it is one of the types of loan lent by a financial institution or a bank against any property mortgage by loan seeker. The procedure of loan disperse is like that,

  • The financial institution will first make an estimated value of your property

  • It will be not more than 50-60% of the total value of the property mortgage by you.

  • As loan against property comes in a secured category the loan seeker has to mortgage their property.

Loan Against Property Purpose

In day to day life there are many needs and requirement of human beings to fulfil those need one has not many options except to take loan, there are few common purposes listed below:

  • For education of your child so that they can pursue their dream

  • For your child’s marriages

  • For expansion of your business

  • For medical treatment

  • For funding your world tour etc.

What the Interest rate and duration for repayment of loan against property:-

The tenure of the loan payment varies from 10-15 years from bank to bank and interest rate as per current prevailing interest rate in the market.

What are the Pre-condition for the loan against property:-

These are the condition completely depends on bank to bank, However, some of the common criteria that almost all banks take into consideration are:

  • Your CIBIL score (higher the CIBIL score more is the chance of loan approval).

  • Value of your property (Greater the value of your property higher the amount of loan disperse usually 40-60%) Your income, your obligation, your debt, and you’re saving.

Loan Against Property Vs Personal Loan

The loan against property is quite different from the personal loan and you need to understand the same, we have shortlisted some of the key difference below for you:

 Loan Against Property  Personal Loan
 Secured loan  Unsecured loan
 Low interest rate  High interest than loan against property.
 EMI is low as interest rate is low  EMI is high as the interest rate is high
 The amount of loan is directly proportional
 to mortgage value
 Loan value depend upon individual salary
 Tenure of loan against property ranges
 between 13-15 years
 Loan tenure for personal loan can be maximum up to
 5 years


Documents for Loan Against Purpose

  1. Complete Loan Application Form

  2. One Photograph of each applicant duly pasted and signed across on application form

  3. Photo Identity Proof (Any One) :-

  4. PAN Card, Passport, Driving License, and Voter’s ID card
  5. Residence Address Proof (Any One) :-

  6. Any utility bill (electricity/telephone/gas), Passport, Driving License, Voter’s ID Card, Ration Card, Leave & License Agreement

  7. For Salaried Individuals :-

    • Form 16 for Last 3 years / Annual Salary Certificate and Income Tax Return Ack.
    • Latest 6 months Salary slip
    • Bank statement/passbook copy with cover page for last 6 months
    • Employer’s ID Card copy
    • Appointment Letter / Increment Letter from the employer and also copy of previous employment letters if current employment is less than 2 years

  8. For Self Employed Business and Professionals :-

    • Last 3 years Income Tax Return Ack and complete set of financials, Audit Report, Tax payment challahs / TDS certificates
    • Last 12 months bank statements / Passbook copy with cover page of all bank a/c’s
    • In case of Company, Memorandum & Articles of Association, List of Directors and Shareholding Pattern on Company Letterhead, Latest Annual Return filed with ROC
    • In case of Partnership Firm, copy of partnership Deed
    • Company Business Profile
    • Office Address Proof (Any One) - Any utility bill (electricity/telephone), Shop & Establishment License, Leave & License Agreement, VAT / Service Tax Registration certificate

  9. Details of Existing Loans and Sanction Letters & Repayment statement of these Loans

  10. Credit Card details & latest credit card statement

  11. If Rental income is to be considered, copy of Rent Agreements

  12. Processing Fees chq

  13. Property Papers :-

    • Latest Agreement for Sale along with the previous chain / link agreements starting from 1st purchaser from builder to till date
    • Society Share Certificate (front & back side)
    • Latest Society Maintenance bill
    • Building sanction plan (Approved Plans) or Occupation Certificate

Additional documents required in case of Balance Transfer (BT) or Seller BT case:-

  • Foreclosure quotation / letter from the bank
  • Letter from the bank / financial institute stating list of documents held by them

NOTE : All documents need to be self attested by the respective applicants. For self employed, all income documents need to be certified by CA.

Tips for Loan Against Property

The mention below points is very important one must keep this point in mind before signing any agreement of loan against property, these are mention below

Charges:- There are different charges for loan requirements so do ask your lender before making any agreement, some of the charges are

  • Processing fee

  • Loan Origination fee

  • Administrative charges

  • Late payment charges

  • Charges of changing from floating to fixed interest rate. Etc.

The interest payable:- It very important to know about the rate at which the loan is given to, kindly do ask your lender about interest rate whether it is fixed or floating and choose according to and wisely. You can also refer to the advisors about which one is beneficial for you to proceed forward and will reap benefits in future for you. Try to take long term benefits from them as it will help your family too.

Down payments and saving: - Different financial institutions have different down payment so before making any agreement kindly do ask about down payment, some have as low as 5% of the total loan amount and some have as high as 20-30%, and there is always a scope of negotiations.

Charges are negotiable and can be waived off as well one should definitely negotiate. You can make a note of it as it is a very important aspect of the saving and down payments stream.

Major Banks Offering Loan Against Property

Almost all the major banks in India dealing in these types of loans, some of the major bank those who are dealing with it are listed below

  • HDFC LTD

  • HDFC BANK LTD

  • AXIS BANK LTD

  • ICICI BANK LTD

  • YES Bank

  • State Bank of India

  • Bank of Baroda

  • Standard Chartered Bank

  • India Bulls Finance

  • Aditya Birla

  • DBS

  • Kotak Bank

  • Edelwise

  • DHFL

  • PNB Hosing Finance

  • Tata Housing