In case of home loan, the loan amount is utilized for acquisition (Purchase/Construct) of a house property by offering the property as security (by way of Mortgage). By offering house property or Commercial property as security, the owners can avail long term financial assistance for their needs such as business expansion, high cost short term loans avail (Personal loans), medical expenses etc..This kind of financial assistance is known as LOAN AGAINST PROPERTY.
Is relatively a new product and aggressively marketed by all Bank’s/HFCs, as it is more profitable, but at the same time, it is a boon to especially business class and self employed people.
While advancing home loans Banks/HCFs will heavily depend on repayment capacity of applicants, where as in case of Loan Against Property, more weightage is given to the value of the property, rental income on the same and capital appreciation of the property.
Our trained Counselors, under the guidance of Bankers, CAs and Valuers, will provide guidance on how to get the best deal by offering existing property as security and assist you in properly structuring the loan proposal, which is vital in getting the best deal like higher loan amount, lower interest rate, long term and with lesser formalities.
Every bank/HFC will have a template to apply for LAP loan, which consists of personal, financial and property details, which is to be filled-in and submitted along with processing fees.
- Identity Proof (Passport/PAN/Aadhar Card/Driving Licence etc. – any one)
- Residence Proof: (Passport/Aadhar Card/Driving Licence etc. – any one)
- Passport size photos
- A) Self employed class:
1) Profile of applicants and their business/profession, website details and licences to run the business/profession
2) Audited Balance Sheet, Profit and Loss Account, Income Tax returns for past 3-5 years of both Individual and Firms
3) Bank statements for the past 2 years of both individual and firm’s
4) Loan statements, if any with repayment track records
5) Assets and Liabilities statements
- B) Salaried class:
- Latest salary slips
- Form 16 of previous years
- ITRs for last 2 years
- Bank statements for past 6 months showing salary credits
- Loan statements, if any with repayment track records
- Assets and Liabilities statements
- Income proof, if applicants have income other than salary
- Title deed in present owner’s name and previous title deeds
- Latest Encumbrance Certificate for last 13 years
- Latest Khata
- Latest Tax paid receipt
- All other link documents and revenue documents of the property for last 13 years
- Construction Plan, approved by competent authorities
- Other statutory approvals issued by various Govt. agencies
The checklist as above may vary slightly from one bank to another.
Financial, Legal and Technical appraisals:
Every Bank/HFC will have their own credit manual for sanctioning and disbursing LAP loans formed under the guideline of RBI/NHB. Credit norms would be similar, but may vary slightly from one bank to another.
Banks/HFCs will verify the financial documents to understand the financial capacity to repay the loan and to understand the credit worthiness, will have credit interview and refer to CIBIL score and report. If CIBIL score is less that 650, leading banks/HFCs may even reject the loan application.
Since prime security to advance home loan is the mortgage of the property, Banks/HFCs hire the services of Panel Advocates for title verifications and Panel Engineers for Valuation and various approvals required for the property development.
We at ‘PropSeva’ provide full range of legal and technical verifications of properties at affordable costs. We also assist in procuring and updating documents, which are sought by funding Bank/HFC from various Govt. authorities. Our Associate Advocates will assist in clarifying the queries raised by Bank/HFC and help in getting legal clearance. We also arrange for property valuations from leading Valuers.
After satisfactory financial, legal and technical verifications, loan sanction letter will be issued by Bank/HFC mentioning loan amount sanctioned, interest rate, EMI (Equated Monthly Instalment), repayment tenure and other terms and conditions.
The loan amount will be disbursed only after documentation (acceptance of sanction letter, execution of loan agreement, executing ECS mandate, providing 5 security cheques, etc..) and creation of mortgage.
Banks/HFCs will issue annual statements of loan repayment to the borrowers informing the Interest paid during the year and the principal loan amount recovered. The statements are necessary for computing income of borrowers and claiming interest as expenses in the books of the firm.
If the loan is availed on variable/floating interest rate scheme, either part prepayment or loan pre-closure will not attract any fine or any other extra charges. And if loan is availed on fixed rate, there shall be pre-closer charges between 2 to 3 percent of outstanding loan amount.
As property value increases over the years and loan amount gets reduced, it is easier to avail Top-up loan, if there is need during pendency of loan repayment. For considering Top-up amount, Banks will see only the repayment track record and the value of property.
Under the guidance of mortgage bankers and senior CAs, we will guide our clients on drawing loan amount sanctioned, selecting proper repayment schedules, prepayments and pre-closures, seeking top up loans, if required.