Understanding Home loan vs Mortgage loan:

• Home loan is financial assistance received from a seller for purchasing a house or for constructing a house independently whether mortgage loan is a type of loan taken in which the house is put as collateral for that particular loan. Here, any immovable property including residential and commercial can be placed with the lender as collateral. In very simple words, the loan taken is secured against a property.
• Now, even though both home loan and home mortgage are secured against an immovable property, the loan amount used makes it different from each other.
• In both cases, if the borrower is unable to repay the loan taken, the lender has the right to seize and sell the property to recover his dues.

What type of documents required for mortgage loan?

1. All registered chain documents of ownership of plot allotment from the beginning (power of attorney in case of general power of attorney)
2. Building construction permission certificate and approved map (Municipal Corporation, Gram Panchayat etc.)
3. In case of flat, registered cell/allotment letter/agreement

Personal information

1. Photo passport size, photo identity card of the applicant, voter identity card, PAN card, Aadhar card, passport, (PAN card is mandatory) PAN card of the property owner is mandatory.
2. Proof of residence – Telephone bill, electricity bill, identity card given by the Election Commission, life insurance policy receipt or Aadhaar card.
3. Income related proof –

•   If the applicant is in employment, salaries slip/certificate of the last three months and Form No. 16A/Income Tax Return of the last two years (for three years if the loan amount is more than Rs 50 lakh).
• If the applicant has a business, profit and loss sheet, balance sheet, income tax returns of the last two years (for three years if the loan amount is more than Rs 50 lakh), business registration certificate issued by the competent authority and business license, bank account statement. last 6 months

In case of a pensioner, 6 months statement of pension payment order and pension credit account.

4. If father/son or husband-wife are co-applicants, proof and consent letter regarding their income as per above.
5. Photocopies of documents submitted along with the application will be verified by the bank officer.
6. In addition to the above, documents required by the legal advisor/bank officer.

Why mortgage and home loan has a big difference?

• Maximum loan amount: Mortgages can usually only be obtained up to 50-70% of the market value of the property (also known as the loan-to-value ratio or LTV ratio), which is assessed by the lender or a third-party advisor appointed by the lender. Is. At the same time, home loan can be taken up to 90% of the agreement value. Also, this LTV ratio may vary as per the type of property, age of the location and from lender to lender. However, some lenders may also offer mortgage up to 90% of the property value in some cases depending on the borrower’s financial track record, repayment tenure and property type.

• Tenure: Generally, mortgage loans are offered for tenure of 20 years or till the retirement age of an individual (and usually 60- 65 years of age for self-employed individuals), whichever is shorter. . Whereas, home loan can be taken for a maximum tenure of 30 years or retirement age, whichever is lower. This tenure also varies from bank to bank.

• Interest Rates: Mortgage interest rates are higher than home loans. Typically, the minimum interest rate for home loans starts from 6.8%; whereas for LAP it starts from around 10% (as of July 2020). Now, these rates may vary from bank to bank, and according to the amount and tenure of the loan, along with any other criteria as per the respective lender.

Additionally, home loans are eligible for subsidy by the government, which further reduces the effective interest rate. Mortgages are not eligible for any such subsidies.

• Prepayment charges: There are no charges for prepayment or foreclosure on home loans taken by individuals if they are repaid through their own funds. However, some lenders charge 1-2% of the prepayment/foreclosure amount for loans taken by entities other than individuals, and payments are made through balance transfer to another bank or lender (even for individuals) went on foreclosure.

In case of mortgage, lenders charge around 3-4% of the foreclosure or prepayment amount as per their rules and guidelines, irrespective of the type of borrower. Additionally, prepayment is not allowed by lenders until a certain period (usually 6 months) from the inception of the mortgage.

• Property Insurance: Most lenders make it mandatory for the mortgaged property to be insured for at least the term of the mortgage. However, property insurance is not mandatory in case of home loans.

How do other features of mortgage lending also benefit us?

• In mortgage loan, you can take loan up to 80% of the value of the property. In some cases the loan amount reaches 85-90%.
• The repayment period of the mortgage loan is decided by the HFC.
• The repayment period of the mortgage loan is known as the term of the loan. You can repay the mortgage loan through EMI in a pre-determined period.
• The mortgage loan balance fluctuates daily, monthly and annually.
• Just as you make down payment for a home loan, the amount of down payment for a mortgage loan can also be 10-20%.
• If you wish, you can repay the mortgage loan ahead of time. Through prepayment, you can save interest by repaying the mortgage loan before the due date.

When Mortgage Loan is considered secured?

A Mortgage Loan in India is deemed secure when the borrower offers their property, as collateral. This agreement gives the lender a stake in the property enabling them to take possession of it if the borrower fails to make their payments. The property acts as a guarantee giving the lender confidence, in the lending agreement.