How many types of Mortgages are in Real Estate?
Finance companies are largely supportive of the real estate sector. They are providing various finance options for customers. It enables the smooth acquisition of properties. Let’s understand a few of the finance generation options available in India:
This is the most common & easily available finance. It makes it very easy for customers to buy homes for self-consumption. With the Indian government’s mission of “Housing for All”, all financial institutions are providing quick home loans. The rate of interest on home loans is the lowest as compared to all other loans in the real estate sector. Currently, home loans are prevailing between 8.5% to 9.5% per annum. The rate of interest keeps on changing from time to time.
Commercial property is any property other than a home. It is not used for self-consumption, but to generate income. Commercial loans are the second most sought-after finance after home loans. The rate of interest is higher as compared to home loans. The process of obtaining a commercial loan is more tedious than compared of a home loan. It largely depends on one’s CIBIL score. Currently, commercial loans are available at 10.5% per annum onwards.
Project loans are finances available for specific projects only. They are specific in nature. In real estate, they are usually used to enhance the value of commercial space by furnishing it. The rate of interest of this loan is higher than the commercial loans & is very subjective in nature. They depend on various factors like project, owner & CIBIL score. One needs to hire a real estate consultant for this finance.
Construction finance is for real estate developers only. It is finance provided by financial institutions to support construction activities. The construction of buildings or premises needs huge capital investments. This makes the projects unviable as its difficult for individuals to generate them. Banks provide such loans to developers for the speedy completion of projects. These loans are also subjective in nature & are available for specific projects only. One takes avail of this facility only under the guidance of a real estate consultant. The rate of interest is higher as compared to all other financial facilities in the sector.
Loan Against Property
Owners of existing real estate can avail of this option. A loan against property is a finance facility provided on an existing property. It can be helpful to generate money to fulfill urgent needs. Banks usually mortgage these properties as security to provide finance to the owners. The finance amount depends on the market value of the property & income of the owner. The rate of interest is a bit higher than the home loan. These loans are easily available & obtained by large in our country.
Top-up loan facilities are available for existing borrowers only. It is the easiest way of generating second finance. It is one of the best products provided by banks in the current market scenario. The paperwork for this loan is the lowest & the rate of interest is usually only 0.5% per annum above the home loan rate.
Lease Rent Discount Finance
This facility is like the loan against the property option. It is only available to the owners of existing real estate. To avail of this facility, the property should be on lease & generating regular income. This financial option depends on the rental amount only. Although other factors are also considered the important aspect is the value of rent. Only experienced & the best real estate consultants can guide you in availing of this facility. The rate of interest is quite reasonable as compared to other finance options.
This is usually for the needy. It’s a new finance available in our country to support the senior citizens. It is for those citizens who are above 60 years of age & have no source of income but own real estate. In this case, the bank mortgages their property & provides monthly incomes to the seniors. This enables them to lead a good & safe life. On the death of these citizens, the banks have the right to sell these properties & recover their money. This is relatively a new concept in India & very helpful for seniors who don’t have a support system.
In a nutshell, India has various finance options available for the real estate sector. It can fulfill both one’s needs as well as wants. Although easy finance options are available one should only avail of them under the guidance of an expert real estate consultant.
- Obtain finance from institutions governed by the Reserve Bank of India only.
- DO NOT take loans from private lenders.
- Hire the best real estate consultant to understand the terms & conditions of the loan.
- Provide your documents to employees of the institutions or your consultant only.
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