A loan against property, as the term literally translates, is a credit scheme which entitles potential loan applicants to borrow the desired amount by mortgaging a property of equivalent value as collateral. To give you an example, if you want to borrow around 10 lakhs as a loan, you would have to mortgage a property worth at least 18 lakhs to 20 lakhs. The exact value of property to be mortgaged varies depending on the market value of the property, the margin of the lender, and the desired loan amount. The margin, while we are talking about it, varies in between 24% to 40% since mortgage loan is not covered under priority based lending.
Moving on, coming back to which type of properties can be mortgaged to avail a loan against property, the answer is as follows:-
1. Residential property: Residential properties such as a 2BHK apartment, a penthouse, an independently owned house, a villa or anything which qualifies as residential property can be mortgaged to avail a loan. Though the properties should not be Lal-Dora property.
2. Commercial property: Properties owned by your business such as the building where your company is based, or your business’ manufacturing unit or some very expensive machinery used in your business can be used as collateral for a loan against property.
3. Farming/ Agricultural land: Though agricultural land or farming land is not accepted as collateral for loan against property in normal cases, farmers trying to get a loan can use farming/ agricultural land as a mortgage.
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