Complete Guide to the Meaning, Working & Types of Mortgage Loans

There are many types of mortgage loans available in India, which include:

• Loans for buying a home 
• Loans for purchasing a commercial property
• Loans against property
• Lease rental discounting 

As you can tell, property ownership documentation is central to the approval process of such loans. Even the loan’s terms and the amount depend on the value of the mortgaged property. However, one size doesn’t fit all, and the processes vary of 

different mortgage loans. 

Guide to Mortgage Loans And How They Work

Big-ticket purchases like properties require a huge investment and mortgage loans help you get the funds you need. The length of repayment can go up to 15-30 years and depends on the loan amount and the financial institution. 

Since this is a secured loan, you must submit your property as collateral to avail of the loan. Based on the property value and your creditworthiness, issuers offer you a loan amount for a designated repayment window. In addition, they charge interest, the rate of which depends on your:

• Credit score
• Existing debts
• Tenure
• Other factors 

You can also repay your loan before the tenure ends if you have additional funds available. Check the lender’s terms and conditions attached to prepayment at the time of choosing the loan so you can understand this better.  

After closing the loan, you will get your collateral documents back with a No Dues Certificate. This makes choosing the right loan terms wisely even more significant.

Also Read: Personal Loan VS. Mortgage Loan

Types of Mortgage Loans You Can Get in India

Here are some mortgage loan examples to help you understand how you can leverage your property for a loan. 

1. Home Loan

• This is a loan you can opt for to buy a home, be it an apartment, villa or anything else
• You can also use it to renovate and refurbish your home

2. Loan Against Property 

• With it, you can leverage your property to raise funds
• It can be a commercial property like offices or shops or a residential property like houses or apartments

3. Commercial Property Loan 

• As an entrepreneur, you can opt for this loan to buy property for your work
• This includes an office space, warehouse, commercial complex, shop, etc.
• The maximum loan amount and other loan terms depend on the property location and value

4. Lease Rental Discounting

• If you have a rented property, you can get a loan against it
• The loan or rent amount collected is the EMI amount in this type of loan, so you don’t have to pay anything extra to repay
• Based on the lease, the lender calculates the loan amount and tenure

5. Second Mortgage Loan

• If you are repaying a loan to buy a property, you can get additional funds against this property
• This is a second mortgage, also called a top-up loan
• It helps you arrange additional funds from the same leader during an emergency

6. Reverse Mortgage

• This relatively new concept in India allows house-owning senior citizens to secure a comfortable retirement
• Senior citizens mortgage their properties to the lender and receive a regular income
• After their demise, the lender sells the property to recover the loan, and their legal heirs receive the outstanding amount

Also Read: How Do Personal Loans Affect Mortgage Application?

Tips to Keep In Mind When Selecting a Mortgage Loan

Here are some suggestions to help you choose the best mortgage loan and manage your repayment.

• Only borrow the amount you can afford to repay 
• Compare the interest rates and choose the lowest rates to keep your costs down 
• Choose a lengthy tenure for easy repayment and a shorter tenure to save more interest overall 
• Choose the right type of montage based on your property 
• Use an EMI calculator to choose the best terms 
• Consider applying with a lender you have an existing relationship with for quick approval and a lower interest rate 
• Have savings you can rely on in a pinch to repay on time and lower the risk of default

Now that you know what is a mortgage, you are equipped to choose the most affordable option that doesn’t put too much pressure on your pocket. If you need quick access to funds and do not want to pledge an asset, opt for the Fibe Instant Personal Loan. You can get up to ₹5 lakhs and use it as you like. 

This smart option has a flexible tenure to ensure comfortable repayment. Moreover, a competitive interest rate, minimal documentation, swift processing and 100% digital application makes it ideal for urgent needs. Download our Personal Loan App or visit our website to apply now. 

FAQs on Mortgage Loans

How would you define a mortgage loan? 

It is a type of loan that uses property as collateral whether it is to buy property, land for construction or get funds against your property. 

How do mortgages work?

Mortgages work like any other secured loan, where you pledge an asset as collateral and get a loan against it. Thereafter, you must repay the loan amount along with the interest in monthly instalments through EMIs.