A loan against property can be used to fund a range of needs from consolidating debt to purchasing your office premises. However, in order to use it to its fullest potential it is essential you understand all the loan against property features. Here are a few lesser-known facts that you may not know about, but you should be aware of if you are planning to take a loan against property.
- You will usually need to Pay Floating Interest
While you can choose between fixed or floating rate of interest on other loans, you will usually need to pay a floating rate of interest when you take a loan against property from most lenders. The interest rates vary among different lenders, which is also why viewing various lender offerings is a smart choice instead of just signing up with your nearest bank or financial company. You can also ask the lender for an estimate to know how much the interest rate could fall or increase to in order to get an understanding or read up on the economic forecast to be prepared.
- You can take a Loan Against Property that is already Mortgaged
Certain lenders allow you to borrow funds using a loan against property even if you already have an outstanding loan on the same property. However, you may be able to apply for a loan against property only for or during a specific period of time. Additionally, other factors like eligibility and down payment can affect the approval of your loan against property. For instance, if the value of the property has increased since the time of purchase, you can get up to 60% of market value while pledging your property as collateral. You can also avail a higher loan amount if you have paid a larger down payment and taken a lower loan amount for the purchase of your home.
- You can Apply with a Co-Applicant
A loan against property can help you get a high loan amount at a lower rate of interest by pledging your property as collateral. However, you can also apply for a loan against property with a co-applicant to improve your eligibility for the loan. It is also important to remember that you will need to co-apply for a loan against property if there is more than one owner of the property you are pledging. This is so that the lender can assure that all the owners of the property are aware of the pledged security and agree to the conditions of the loan.
- You can Avail a Few Tax Benefits
You can avail some tax benefits according to the usage of the loan. For instance, you can claim tax deductions under Section 80C and under Section 24 if you are using the loan to renovate the same property by adding a few floors or conducting other construction activities. You can also claim tax deductions if you are using the loan amount for business purposes. Have a financial advisor help you with the best way to save taxes when you take a loan against property.
You can also enjoy benefits like doorstep documentation pickup, zero prepayment or part-prepayment charges, Flexi Hybrid facility, simple loan against property eligibility criteria and more.