Real Estate residential property is one of the greatest valued assets owned by a middle-class individual or family. Real estate makes for a good investment and is generally expected to appreciate at value and price in the long run. However, one should understand that it is not the physical form of a dwelling that sets the prices soaring in the market.

There are several factors like the land upon which the dwelling is situated, the locality in which it is situated, the promise of future development, and so on. For instance, if your apartment was situated close to a commercial hub in the city, its property value will be higher than that of another apartment similar in every aspect, but located on the outskirts of the city. If you want to avail of a loan against your property, you must know its value.

As an individual with a steady source of income, you can apply for a loan for any purpose other than an illegal or speculative purpose. As such, if your credit profile and the documentation of the property is solid, bankers and lenders have no issues sanctioning and disbursing a loan in your favor against your residential property as collateral. This article attempts to guide you on the steps needed to be taken for availing a loan against your residential property.

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How can I get a loan against my property?

There are different kinds of loans against property (mortgages) you can avail for achieving your goals:

  1. Loan against property for education
  2. Loan against property for wedding
  3. Loan against property for renovation
  4. Loan against property for debt consolidation
  5. Loan against property for professionals

You can take a loan against property that is fully constructed. Banks and lenders can give loans up to 60% of the market value of the dwelling. However, this percentage can go as high as 90% depending on the merits of the property and your credit profile. Your credit profile and the value of your property go a long way in determining the quantum of the loan amount.

  1. First and foremost, you need to check your eligibility for the loan. For eligibility:
  1. You need to be an Indian
  2. If you are salaried or self-employed, you need to fulfill the age criteria which varies from lender to lender. For instance, Bajaj FinServ Ltd. has an age limit of 62 years for salaried applicants and 70 years for self-employed applicants. This is because the age of 60-65 years is perceived as the “age of retirement”.
  1. You have to ensure all the documentation i.e. your property papers and other documents related to the property are in order. Documents regarding your income and personal details are also a must. If all the documents are prepared and ready for submission, the banks claim to disburse the loan within 48 hours. Documents like:
  2. Proof of Identity and residence (KYC) details
  3. Proof of Income
  4. Property related documents
  5. Photographs of applicants
  6. The cheque for the processing fee
  7. Bank statement of last 6 months
  8. Employment contract/Appointment letter

These are some of the documents that you should be prepared to submit for your loan application.

Can I take a loan on my father’s property?

A home loan on a property, residential property, in this case, is not possible if you are not the owner of the property. To avail of a loan on your father’s property, you would have to make him a co-applicant for the home loan. Then the loan can be disbursed. However, if your father happens to be ineligible due to the age criteria, no need to fret. As a co-applicant, you negate his ineligibility.

Another option you can use is to get your father to execute a gift deed in your favor under Section 122 of the Transfer of Property Act, 1882. This provision allows the transfer of immovable property through a gift deed. If this were to happen, you become the owner of the property or the part of the property transferred to you. Now as the owner of the property or part, you can avail a home loan against it.

Is it better to get a home loan from a bank or lender?

You, the applicant, can avail a home loan against your house either from a bank or a housing finance company. However, there are factors like loan repayment period, interest rates, processing fees and other charges, etc. that need to be taken into consideration. Where the RBI regulates commercial banks, housing finance companies are non-banking financial companies regulated by the National Housing Bank (NHB). The advantages of taking a loan from a bank are:

  1. Since the RBI is the authority that changes the interest rates on lending based on the marginal cost of funds-based lending rate (MCLR) model in India, Banks are more likely to follow suit and pass on the advantages of the rate change to borrowers. Say, for instance, interest rates from 8% were to fall to 7%, it would result in lower EMI outflows if you have a home loan with a floating rate of interest from a bank. A housing finance company may not do so.
  2. Banks offer an overdraft facility on home loans. A facility like this allows the borrower to withdraw surplus funds from the overdraft facility and make payments towards the home loans. With the liability extinguished earlier due to the payments made from the overdraft facility, such a scheme saves money in the long run by making pre-payments towards the loan.
  3. Banks can be very co-operative if your credit profile meets their high standards. Their interest rates are very competitive and attractive as compared to housing finance companies that disburse loans with higher interest rates.

The advantages of taking a home loan from a Housing Finance Company are:

  1. A housing finance company is relaxed when it comes to the documentation required for sanctioning loans. Banks can be very strict when it comes to documentation.
  2. A housing company is also relaxed when it comes to your credit score. Your credit profile, though important, is not a deal-breaker when it comes to housing finance companies.
  3. Unlike a bank, a housing company is also more liberal with the quantum of the loan disbursed. It means it is more likely to extend a larger loan amount to you. They are more likely to cover stamp duty and registration charges also.

You have to weigh the pros and cons when it comes to these institutions and makes your choice accordingly.

Is it better to get a mortgage from a bank or a broker?

When it comes to mortgages, you have two options from here you can avail the funds-the mortgagor or the bank, which is also called the direct lender in the mortgage industry.

It is the circumstances and your needs which determine the option you want to choose.

  1. When it comes to banks, banks use their own money to give you a mortgage. They are the main parties that fund your mortgage and, hence it is with them your house or dwelling is mortgaged.
  2. Brokers are not financiers. They are agents who act as middlemen to facilitate the availing of a mortgage. They act as a bridge between those in need of mortgages and the lenders willing to lend money.

The advantages of a bank are as follows:

  • If you already have an established relationship with a banking company, it may be best for you to approach it directly. This helps you save time and escape the hassles of dealing with the middleman and the bank.
  • Dealing directly with a bank also reduces your expenses of availing a mortgage as the element of middleman’s commission need not be paid.

The advantages of a broker are as follows:

  • When you do not have any prior relationships with a direct lender, you may have to apply to multiple lenders for a mortgage. This process is filled with hassles and can be arduous. This is where a broker steps in and simplifies the process by finding the most suitable lenders with attractive prices and rates for you.
  • The broker also assists you on your mortgage application, ironing out wrinkles that may get it rejected.

A broker charges a commission for all this, which increases the costs borne by you, but improves convenience if you have no prior relationship with a lender.

These two options have their pros and cons. In case you avoid the hassle of contacting various banks and selecting the most favorable one, a broker is what is best for you. But if you already have a prior relationship with a bank, it is the best route to go through, for you may not only avoid middlemen expenses but may also receive concessions.

Is it better to buy a house with cash or a mortgage?

In the case of financing your purchase of a house, maintaining your financial health is what should be your priority post the house’s purchase.

  1. When it comes to using your cash reserves to purchase a house, the transaction happens to be simpler than that involving a mortgage.
  • Payment in cash for purchasing a house means no payment of interest throughout loan tenure and other miscellaneous charges.
  • The hassles of documentation are also greatly reduced when you avail of this option.
  1. When it comes to using the funds from a mortgage for purchasing a house, the advantages happen to be the following:
  • A mortgage is paid off in installments which do not put an immediate strain on your finances.
  • Availing the option of mortgage to purchase a house allows one to avail certain tax deductions under the Income Tax Act, 1961.
  • Mortgages also allow for more cash in your hands in the long run, due to your immediate cash reserves remaining intact.

When it comes to availing any one of these options for the purchase of your house, you need to ensure that the option allows you to save as much money as possible for future benefit.


A house is an immovable asset of great value. It can be put up as strong security or collateral for availing loans to purchase a new house or to achieve other financial goals. Banks and housing finance companies have different criteria when it comes to advancing loans and the choice of the lender has to be exercised carefully by you.

In turn, you also need to ensure you are eligible for a loan from these entities and maintain the required documentation for the smooth approval of your loan or mortgage application. There are several avenues available to you to purchase a new house, but you need to ensure the one which is relatively hassle-free and saves you money. Buying a house should be a dream come true, not a burden to be paid off.