4 Tips To Get Loan Against Residential Property

If you own a residential property you live in, have rented or leased, you can use it to raise money for your business. All you need to ensure is that the property is under your name and there is no loan on it. If you own the property with another individual, they can become co-applicants for the loan. Loan against residential property is also known as secured loan and it is one of the most common forms of borrowing in the country. It gives access to a high loan amount and has low-interest rate. Since the risk associated with the loan is low, the interest rate is significantly low. Here’s how you can get a loan against your property.

1. Estimate the amount you need: It is always better to apply for a loan when you know the purpose of borrowing and the exact amount you need. When you identify the purpose of borrowing, you will be in a better position to estimate the amount. Remember to be very careful here. Overestimation or underestimation can put you in trouble. Understand the cash cycle and then decide on the funds you want to borrow.

2. Check market value of property: Your residential property will not be valued as much as it was valued when you bought it. Real estate prices change with time and the loan amount will be based on the market value of the property. The lender will extend funds for about 60% to 70% of the value of the property. So, you need to get the property valued and if you have the valuation report, you can provide it to the lenders. This is not a mandatory step because the lenders will hire a market valuer to estimate the property value when you apply for the loan. However, if you are aware of the market value, it will put you in a better position to plan the loan and negotiate with the lender.

3. Hypothecate the property: Once you have decided on the lender you want to approach, you will have to check their eligibility criteria and documentation requirement. You need to submit the original documents of the residential property and hypothecate them with the lender. When you repay the entire loan, the lender will transfer it back to you. The process of hypothecation is very important.

4. Use EMI calculator: The EMI calculator is available online and will give insights into the EMI amount payable on the loan. You can use it before you sign on the loan documents. It only requires you to provide the loan amount and tenure.

It is important to understand the terms and conditions of loan against residential property thoroughly. If you default in the repayment, you could end up losing your property to the lender. Hence, prepare a repayment schedule and ensure timely payment of dues. Your idle residential property can be put to good use and it will help grow your business and take it to new heights.

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