Do we get the same rates as home loan (for buying new home) when we take a loan against self owned clear title property?

Or are the rates higher - if higher, then how much higher?

Are rates of loan against property lower than a car loan or an education loan?

How much of an appraised value for a flat can be taken as a loan - or do they only give you the purchase BSP price for it?

How easy and quick is a loan against property if one is in sudden need of cash?

Can loan against property be a better option than selling the property? Or does it make better sense to just sell it off and not spend money on EMI and interest?

Would like all your opinions please.
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  • 1) Loan against property is charged 2-3% higher compared to new home loans , though each lender follows a different strategy

    2) Tenors on Loan against property are much longer than car or education loans so the repayment is much lower. Purely from a IRR perspective rates will be similar to new car loans. Sometimes depending the car - your car loan pricing can actually be lower because of dealer passback / manufacturer discounts. Education loans vary a lot (government banks sometimes have good deals on them)

    3) Typically upto 80% of the TOTAL value of the property can be the loan value. But they will also consider repayment capability (EMI < 50% of Gross Monthly income is an accepted EMI)

    4) The process can take 2-3 weeks easily since it will include things like customer approval, valuation, title search (done by legal company) and then the actual disbursal.

    5) Some banks give you a deposit account + loan combined so whatever amount you have in your current / savings account you will not be charged interest on for that day. Example loan = 30 lakhs , deposit = 4 lakhs (interest for that day charged on 26 lakhs only). I think Citibank and Standard Chartered have these products. This product is usually higher interest rate (about 0.5%) but then you have the flexibility to put money in your deposit account and then only use when you need.

    6) The last question depends on your outlook. If you need the property ultimately for end-use or if you do believe that it will appreciate higher than your interest rate - taking a loan is the preferred option. Transaction costs in India are high so re-purchasing the same property again sometimes is not easy given registration costs etc etc. You may also want to consider the rent aspect.


    Check sites like www.apnaloan.com for some references and comparisions.



    Originally Posted by Venkytalks
    Do we get the same rates as home loan (for buying new home) when we take a loan against self owned clear title property?

    Or are the rates higher - if higher, then how much higher?



    Are rates of loan against property lower than a car loan or an education loan?

    How much of an appraised value for a flat can be taken as a loan - or do they only give you the purchase BSP price for it?

    How easy and quick is a loan against property if one is in sudden need of cash?

    Can loan against property be a better option than selling the property? Or does it make better sense to just sell it off and not spend money on EMI and interest?

    Would like all your opinions please.
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  • Originally Posted by Venkytalks
    Do we get the same rates as home loan (for buying new home) when we take a loan against self owned clear title property?
    The rates of home loan are hovering at 11-14% depending on the bank
    Or are the rates higher - if higher, then how much higher?

    Are rates of loan against property lower than a car loan or an education loan?
    Depends...VW and other new entrants are giving at 6%
    How much of an appraised value for a flat can be taken as a loan - or do they only give you the purchase BSP price for it?
    For a new flat 80-90% and ready to move flat depends on market price. your income level and job/business profile plays a very important role.
    How easy and quick is a loan against property if one is in sudden need of cash?
    1 week is the fastest.
    Can loan against property be a better option than selling the property? Or does it make better sense to just sell it off and not spend money on EMI and interest?

    Would like all your opinions please.


    Better option is reverse mortgage but for that i need to depend on my father as am still looong way to go for becoming senior citizen. These locans are avl at 8-9% flat fixed rate where u can live in the house and make it a revenue model for yourself. Best thing is that u dont pay any interest for 10 yrs. Yes if u prepay the loan say within 5 yrs then u pay the principal and interest 8-9% .
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  • Originally Posted by Munish Malhautra
    Better option is reverse mortgage but for that i need to depend on my father as am still looong way to go for becoming senior citizen. These locans are avl at 8-9% flat fixed rate where u can live in the house and make it a revenue model for yourself. Best thing is that u dont pay any interest for 10 yrs. Yes if u prepay the loan say within 5 yrs then u pay the principal and interest 8-9% .


    Reverse mortgage is OK for regular living expenses of old people.

    I am thinking more of - say - an education abroad for my children - is it better to sell a flat for this, or is it better to take a loan against property for this?

    As pointed out, registration and other expenses for property are both expensive and difficult in India.

    So instead of selling flat, one can take a loan of say 1 crore against flat and then repay from salary 1L pm of EMI for 15 years (assuming salary increases that much in the meantime) - only thing is, if the rates are very high and are some 3-4% higher than for home loan, then it becomes an expensive loan at 14 odd % and is not worth it.

    Most education loans are not enough for going abroad.

    Just evaluating future options of unlocking value from flat
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  • Hi SBSBPO. Thanks for your detailed response.

    I went through the apna paisa article, which said:

    Apnaloan.com Research Bureau

    26 May 2008



      A loan against property is given against an existing property of the customer while a normal home loan is a loan given for the purchase of a property.


        In a loan against property, the end use is not monitored and you can utilize these funds to meet any of your financial requirements. Whereas in a normal home loan, the end use of the loan amount is monitored to ensure that the loan is actually used to pay the seller of the property.


          The interest rates on loan against property are higher than rates on home loans because the purpose, for which the loan has been utilized, is not monitored by the bank.


            In a regular home loan, the agreement value of the property is taken as a benchmark. In a loan against property, the finance is against an existing property, and hence the property needs to be valued by an approved valuer. Therefore, the loan is based on current market value.


              The maximum tenure for which you can get a home loan is longer compared to that of loan against property. For home loans its 25 years whereas its only 15 years incase of loan against property.
              Article was a little old but made sense.

              What I dont understand is this - if my salary can cover the EMI and I am providing the deeds as security, why would the bank charge a higher rate just because it is not able to monitor the end use?

              How much negotiation is possible?

              HAs anyone in the forum taken loan against property who might be able to guide me?

              If we look at SBI:


              Loan against Mortgage of Immovable Property
              (Base Rate 9.50 % w.e.f. 11.07.2011)
              Size of Credit Limit
              (Term Loan)
              Rate of Interest
              Upto Rs. 1,00,00,000/-
              5.25% above Base Rate Floating, currently 14.75% p.a.
              Above Rs. 1,00,00,000/-
              5.50% above Base Rate Floating, currently 15.00% p.a.
              *No Overdraft against Mortgage of Property



              (Base Rate 9.50 % w.e.f. 11.07.2011)
              SBI Student Loan Scheme

              Loan Amount
              Rate of Interest
              For loans upto Rs.4 lacs
              3.75% above Base Rate, currently 13.25% p.a.
              Above Rs.4 lacs and upto Rs.7.50 lacs
              5.25% above Base Rate, currently 14.75% p.a.
              Above Rs.7.50 lacs
              4.25% above Base Rate, currently 13.75% p.a.


              (0.50% concession in interest for girl student)
              (1% concession in interest for the entire tenure of loan if the interest is serviced during moratorium period)



              SBI ADVANTAGE CAR LOAN SCHEME

              SL. No
              PARAMETER SCHEME
              DETAILS
              1
              Applicable to
              All New Car Loans to Public
              2
              Interest Rate
              At present the following Interest rates are applicable:
              For Term Loan:
              2.25% above Base Rate, i.e. 11.75% p.a.
              For Overdraft:
              OD will attract 0.50% more than the existing rate for Term loans.



              HOME LOANS - INTEREST RATES

              Print Page]
              All Rate are floating only
              (Base Rate= 9.50% p.a.)

              Loan Amount
              Linkage with Base Rate over the tenor of the loan
              Present Effective Rate
              Upto Rs. 30.00 lacs
              1.00% above Base Rate
              10.50% p.a.
              Above Rs. 30.00 lacs and upto Rs. 75.00 lacs
              1.25% above Base Rate
              10.75% p.a.
              Above Rs. 75.00 lacs
              1.75% above Base Rate
              11.25% p.a.

              No fixed rate option in any limit bracket.



              Home loan is the cheapest, followed by car loan, followed by education loan and highest is the loan against property.

              Whereas with property there is a more than 100% of loan collateral being mortgaged.

              This means you get a cheaper loan for a flat which might not get built at all, a car which might crash and become junk, a student who might fail to study or ever get a job - but for an already existing flat you dont get a cheap loan?

              This is just bizarre.

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  • Venky,
    Hv u reached to some conclusion?
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  • Home Loan, education loan has subsidiary attached to it....


    This means you get a cheaper loan for a flat which might not get built at all, a car which might crash and become junk, a student who might fail to study or ever get a job - but for an already existing flat you dont get a cheap loan?

    This is just bizarre.

    CommentQuote
  • Originally Posted by Akash1
    Home Loan, education loan has subsidiary attached to it....


    This means you get a cheaper loan for a flat which might not get built at all, a car which might crash and become junk, a student who might fail to study or ever get a job - but for an already existing flat you dont get a cheap loan?

    This is just bizarre.



    Its works on the same fundamental-More risk, more returns. no gain no pain:):)

    Its works on the same fundamental-More risk, more returns. no gain no pain:):)
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  • Bizarre!

    My question is if I can take loan basis my salary itself, then why would I want to take LAP? This is so stupid.

    Ideally LAP should be the cheapest possible loan considering my existing property is say worth 1cr, and I am taking a loan of 50L.

    Also, if I have the capacity to pay back 50L, why would I mortgage my property?

    Is this trend an India specific ch****ppa? or a global phenomenon?
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  • Use Your House For A Cheaper Loan










    Source: The Economic Times By: Amit Shanbaug Publish: 1-April-2013
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