Loan Against Property Interest Rate, Processing Fees, and Application process
All major banks and non banking financial institutions offer fixed rate loans for residential and commercial properties. A loan against property is also referred to as a mortgage loan, and borrowers need to check the eligibility criteria while looking out for interest rates that fit their bill.
Both salaried and self employed individuals are eligible for a loan against property. The application process & necessary documentation are standard across prominent domestic banks and non banking financial institutions. Processing fees in the range of 1 to 3 % of the loan principal are charged by all domestic banks and major NBFCs.
Find the right lender and get access to funding by:
- Checking the credentials of the lending institution.
- Arranging all necessary documentation for processing.
- Connecting with the customer support service for queries & clarifications.
- Applying online or visiting the premises for application.
- Reviewing the loan against property conditions and constraints offered.
- Submitting all necessary documents for quick disbursement.
The necessary documentations for a loan against property application are:
- Personal Identity & Residential Proof (Aadhaar Card, PAN Card, Passport, Voter Identity Card, etc.)
- Income proof (Salary slips for salaried applicants & business profile documents for self employed individuals, income tax return slips, bank account statements)
- Property Documents (Title deeds, previous document chains from erstwhile owners, property approval plans, property tax receipts, registration certificates, approved building plans, etc.)
- Minimum six months’ worth of bank statements on former loan repayments, passport-sized photos
- Self-employed individuals such as business proprietors need to produce proof of existence, business office address, financial statements of the last 3 years, and information about other debts.
Loan Against Property Interest Rate (Floating)
For floating rate loans, interest rates fluctuate with time and vary across banks & NBFCs. The interest rates start from 8 per cent per annum + GST charges. The maximum loan amount is INR 25 crores and the upper limit of the loan tenure is 20 years. Additionally, processing fees apply at 1% to 3% of the loan against the property interest rate plus GST charges.
Below are the loan against property interest rates, maximum loan amount, and loan repayment tenure, respectively, of prominent banks & leading non banking financial institutions as of 26th August 2022. . (Processing fee, in the range of 0.5 to 6%, extra).
- State Bank of India: 8 to 10% p.a., Up to ₹10 crores, 3 to 15 years;
- HDFC Bank: 8 to 8.95% p.a., Up to 65% of the collateral property value, up to 15 years;
- Bank of Baroda: 8.2 to 13.85 % p.a., ₹2 lakh to ₹10 crores, up to 15 years;
- Union Bank of India: 8.5 to 10.65% p.a., ₹5 lakh to ₹10 crores, up to 15 years;
- Bajaj Finserv: 9.10 to 18% p.a.(8.6 % for self-employed borrowers), up to ₹5 crores, up to 18 years;
- Tata Capital: rates start from 10.10% p.a., ₹10 lakh to ₹3 crores, up to 15 years;
- Axis Bank: 10.5 to 11% p.a., ₹5 lakh to ₹5 crores, up to 20 years;
- IIFL: 11.5 to 25% p.a., up to ₹10 crores, up to 10 years;
- Federal Bank: 10.10% onward, up to ₹5 crores, up to 15 years
What are the Types of Loans Against Property?
Different types of loan against property are available in the Indian finance sector.
Loan Against Residential or Commercial Property
This is a generic mortgage loan taken by property owners by pledging personal or commercial properties for a specific loan amount. The bank loan value depends upon the value of the mortgaged property. Borrowers can choose between a floating interest rate and a fixed interest rate.
Loan Against Property Balance Transfer
Borrowers can get a lower loan against property interest rates by transferring their existing loan from one lender to another. Low interest rates mean lower EMIs. In addition, by transferring the property balance to another, a borrower can also avail of a top up loan of a different amount.
Loan Against Property Top-up
Loan top us are additional credits offered above and beyond the current loan against property. Borrowers can avail of a top-up loan in a property balance transfer.
Loan Against Property Overdraft
Allows borrowers to withdraw a certain amount from their loan against property as an overdraft. In the case of the overdraft facility, the loan against property interest rate applies to the overdraft amount withdrawn.
Loan Against Property for Chartered Accountants
Chartered accountants in India get to enjoy high-value LAP with simple eligibility criteria. As a result, property interest rates across banks and NBFCs are highly competitive with facilities such as doorstep document pickup services.
Loan Against Property for Doctors
Like CAs, doctors and medical professionals also enjoy high-value loan against property at attractive interest rates. In addition, easy processing, simple eligibility criteria, and swift approvals are key facilities that doctors can enjoy.
Loan Against Property Debt Consolidation
Bad credits with high interest rates can damage credit ratings and bring about financial ruin. Debt consolidation allows borrowers to clear existing & bad debt obligations by taking out a larger loan & consolidating repayment under a single source.
Loan against property for debt consolidation is an excellent strategy as loan amounts are high and the tenure is extensive. LAP can be used to settle any small-scale personal loan or business loan. Moreover, LAP interest rates are nominal across many major banks in India and even certain NBFCs.
Factors Affecting Loan Against Property Interest Rates
Any loan against property is, in actuality, a type of mortgage loan where the borrower puts forth some owned property as collateral for a debt.
These loans are the precursors of mortgage-backed securities & generally secured by premium assets such as real estate, commercial, or residential properties. Thus, loan against property interest rates tends to be nominal and competitive across lending institutions. However, the interest rate changes from one client to another and depends upon several factors.
The Credit Score
The borrower’s credit score is a significant factor in determining property interest rates. If your CIBIL score is high enough(750 or more), expect better interest rates from your lender.
The Borrower’s Profile
All lending institutions take a close look at the applicant’s financial profile. It is a customary part of the approval process wherein they dwell into the loan applicant’s financial history & credit record, take a close look at their income proof, as well as inquire about the financial needs behind the loan.
Salaried individuals can score a lower loan against property interest rate if they have a steady income & employed at a reputable place. A self employed professional such as a doctor, or a sole proprietor can also enjoy lower interest rates. Income and debt-to-income ratio are two metrics checked with individuals having a high income & low debt-to-income ratio who can get lower interest rates.
Finally, the loan applicant’s age and the number of working years they have left are also crucial aspects of the borrower’s profile.
The Loan Duration
The loan tenure is another crucial factor that influences the loan against property interest rate. If you choose a short tenor, the lender may reduce the floating interest rate. This is because it allows creditors to determine variations in the applicant’s financial profile and fluctuations in the LAP rate.
The tenor of a loan affects credit profiles, and lenders will analyse its impact on an applicant’s profile before deciding upon the repayment period.
The Collateral Property
The property’s value to be used as collateral is another vital factor. Specific lenders consider residential properties more valuable and charge lower interest rates if used as collateral. High value properties with proper amenities & boasting of a great location can help fetch lower interest rates.
Foreclosure Charges and Part-payment Charges
Certain banks and NBFCs levy particular charges if borrowers choose to foreclose their loans. When imposed, foreclosure or prepayment charges are calculated at 2.5% of the principal interest amount. In addition, GST may be added to such payments, and the charges are generally determined per bank directives.
Certain NBFCs and banks also have part-payment charges when borrowers intend to foreclose a loan through part-prepayment. They are levied at 2% to 4% of the part-payment amount plus additional taxes.
Loan Against Property Rate Trends of Top Banks
The loan against property interest rate trends of top domestic banks are as follows:
- State Bank of India = 8.05% onwards
- Kotak Mahindra Bank=7.5% onwards
- Bank of India= 7.3% onwards
- Union Bank of India=7.9% onwards
- Bank of Baroda=7.45% onwards
- Central Bank of India=7.2 to 7.65%
- Citibank=6.65% onwards
- ICICI= 8.5% onwards
- Axis Bank= 7.6% onwards
- Punjab National Bank=7.4% onwards
- Punjab National Bank Housing Finance=7.5% onwards
- IDBI Bank= 7.6%
- Standard Chartered Bank= 7.25% onwards
- Yes Bank= 8.95%
- Karur Vyasa Bank= 8.05%
- HSBC Bank= 7.35%
- UCO Bank= 7.4%
The above values reflect interest rates updated as of 27th August 2022.
How to Get Loan Against Property at Low Interest Rates?
One must pay attention to all the different factors affecting the loan against property interest rate. For example, a high CIBIL score and good credit history, appropriate loan tenures, the right kind of loan amount from the right lending institution, and the credit-worthiness of the asset to be as used as security– paying close attention and tactful manipulation of these factors can bring down loan against property rates.
Tips to Reduce Loan Against Property Interest Rate
Follow the tactics below to bring down interest rates further:
- Always declare all sources of income to the lending institution. Disclose details of income sources in your loan application and discuss them with an official. Transparent disclosure and submission of proper documentation of additional income sources, such as property rents and returns from investments, enhance your financial profile, boosts your approval chances, and have a high probability of bringing down the loan interest rates.
- A good credit score highlights a reliable borrower who can repay the loan amount as per the decide-upon conditions. Good credit scores improve credit history and a lending institution understands that it can rely upon said borrower with comparatively low risk. The perfect credit score (CIBIL, CRIF, etc.) for any property-backed or mortgage loan is 750+.Suppose your score is lower than the ideal value. In that case, it is best to improve it by clearing bad debts, paying EMIs in time, and reducing credit uses & liabilities, before applying for a loan against property.
- Look at the rates offered by different loan slabs and choose one that fits your bill. It may very well be that the interest rates for the ₹50 lakh slab are lower than the rate associated with the ₹30 lakh slab. Find out the applicable interest rate for different loan slabs.The interest rate may be lower for a loan in the Rs.30 lakh range than one in the Rs.20 lakh range.
- Think hard, think ahead and then decide upon a tenure you are comfortable with. Choosing a suitable term significantly and directly impacts the loan interest rate offered by any lender.
- Research thoroughly and have multiple options at hand when searching for a lender. Shortlist as per your requirements and always look for those lending institutions that offer competitive rates & different offers as per requirements on their loans.
- Avoid sending multiple applications to lending institutions. If your application gets rejected numerous times, it will drastically affect your CIBIL score. A low CIBIL score will lower your chances of getting a reasonable interest rate for a loan against property.
- Know your capabilities and prospects. Always opt for a loan amount you know you can quickly repay. Keep the mind the rate of interest and how it accrues over time. Use EMI calculators and choose a lower property loan interest rate that you will be able to repay within time.
Yes, certain banks and non banking financing corporations allow changing a particular loan against property interest rate value to prevailing interest rates. However, such rate conversions come at a price the lending institution exacts as a conversion fee.
Besides the interest rate, the property’s value to be mortgaged also determines the amount of the loan against the property. This is called the Loan-to-Value Ratio. The condition of the mortgaged property, location, amenities, etc. are all contributing factors, and if all these factors pan out correctly, one can get a loan of up to 70% of the value of their asset.
Banks and NBFCs may also charge processing fees, prepayment, late payment fees, and bounce cheque charges.
Many banking and NBFC websites offer a digital EMI calculator that can show the monthly interest value. As for the loan against property interest rate, they vary from one bank to another. So consult with the lending institution to determine the LAP interest rate.
Here are some tips:
- Review the loan against property rates for different loan slabs.
- Choose an appropriate loan tenure.
- Opt for a lending institution that offers lower interest rates.
- Avoid sending out multiple applications, as every rejection of applications will negatively affect the CIBIL score.
- Submit income proof and disclose all income sources.
- Have a strong credit score and a good credit history.
Yes, you can. For example, if you find it challenging to manage a significant EMI, you can transfer the outstanding loan against property to another bank offering a better interest rate. Most banks will, however, require borrowers to have a certain outstanding amount, a clean repayment history, and another existing loan in good standing. In addition, in certain instances, a borrower must have at least 12 successful repayments to be eligible for a transfer.
If all factors are in your favour (good credit score, strong financial profile, high-value collateral, the right loan against property amount & tenure etc.), then you can get a whopping 85% of the collateral asset value as your loan principal.
The minimum interest rate for loan against property in domestic, commercial banks across India is 8%.