A mortgage loan in India is a financial facility designed to help individuals meet various personal needs such as funding marriages, higher education, business travel, medical emergencies, or unforeseen expenses. It can also serve as a secured overdraft for liquidity finance and allow customers to benefit from lower interest rates by taking over existing mortgage loans from other banks or financial institutions. The rules such as eligibility criteria, loan amount, interest rate and other criteria may differ from bank to bank, but typically, here are the details for mortgage loans. For example, here are the rules for Union Bank.
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Eligibility Criteria
- Indian citizens, both residents and non-residents, are eligible.
- Only applicants having a regular source of income are eligible.
- Borrowers should own non-agricultural properties, which can be residential, commercial, or industrial.
- Applicants can apply individually or jointly with other eligible individuals.
Loan Amount
- Minimum: Rs. 5 lakhs
- Maximum for Resident Indians: Rs. 10 crores
- Maximum for Non-Resident Indians: Rs. 5 crores
Security and Location
- Property offered as collateral should be located in metro/urban/semi-urban areas within municipal limits.
- Property types eligible for security are residential and commercial properties. Open plots/land are not acceptable.
- All co-owners of the property must join as co-applicants.
Types of Facilities
Term Loan
Maximum repayment tenure is the lowest of three factors:
- 15 years (180 months)
- Residual period until the borrower turns 75 years old
- 5 years prior to remaining property life
Overdraft
- Maximum tenor of 15 years (180 months)
- The limit reduces every month with a fixed amount, ensuring total principal repayment within the loan tenure.
- Monthly interest is calculated and debited based on the actual use of the limit.
- Account must be adjusted 5 years prior to the remaining life of the property.
Moratorium and Prepayment
- No moratorium period is allowed under this scheme.
- There is no prepayment penalty.
Insurance
Property must be comprehensively insured for an amount not less than the property's value (excluding the cost of land), covering all risks with a bank clause.
Interest Rate
The rate of interest can vary and is subject to the latest interest rates provided by the lender.
Check with a few banks for their rules for mortgage loans and the best rates and loan amounts before you decide with which bank to deal.
