A Complete Guide of Loan Against Property Glossary & Terminology

Loan against property is an excellent way of getting funds in bulk. The flexibility of loan against property is highly beneficial. You are free to use the funds for personal use or business use. There is no mandate on usage of funds. You can get a loan against property on residential or commercial property. The benefit of using your own property’s value can meet any financial requirements you may have. Lenders have the security of holding the property mortgaged in case there is a default. 

In this article, let us understand the loans against property glossary and terminology in-depth. Knowing the important loan against property terminology is extremely important so that you make an informed decision. 

1. Mortgage

Mortgage, in simple terms, means pledging your asset in exchange for receiving funds against it. Generally, mortgage loans in India refer to home loans (loans used specifically to buy a home) or a loan against property, wherein a borrower pledges a fixed asset he/she already owns in order to get access to funds. In loan against property or mortgage, the lender retains the deeds to the property pledged till repayment of the loan. The borrower can continue using the property until then, but will not be allowed to mortgage it again until the current loan is repaid.

Must Read: Different Types of Mortgage Loans In India

2. Loan to value (LTV)

LTV is a ratio that reflects the amount of loan against property you can get on your property. You may calculate it by dividing the borrowed loan amount by the fair market value of the property. To estimate the maximum loan amount you can get for your property, use our free LTV calculator today.

3. Fixed Obligations to Income Ratio (FOIR)

FOIR is a primary factor in determining your eligibility for the loan. You have to take into account all your debt against your monthly income. Most lenders may reject applicants whose FOIR is more than 50%-60%

4. Principal Loan Amount

The principal loan amount is the loan amount borrowed as loan against property from the lender. However, during repayment, the borrower has to pay the principal loan amount along with the interest. The repayment is done via monthly EMIs (which constitute a principal as well as an interest component).

5. Tenure

Tenure is the duration in the number of years the borrower will be paying off the loan amount back to the lender. Loan tenure begins on the day the funds are credited to your bank account, or as per the schedule provided to you by your lender. During the committed tenure, you have to pay the EMIs to the lender. The longer the tenure, the lower your EMI amounts. SMFG India Credit offers a flexible tenure of up to 15 years.

6. Equated Monthly Installments (EMIs)

EMI is the monthly amount that is paid to the lender till the end of the tenure agreed upon. EMIs are calculated based on the loan amount, the interest rate, and loan tenure. SMFG India Credit offers a Loan against Property EMI calculator to get clarity on your EMI within a few seconds. 

7. Property Title

Property title is the person officially owning the particular property. When you take a loan against property, your property ownership title is given to the lender during the tenure of the loan until repayment.

8. Floating and Fixed Interest Rate

Floating interest rate is a flexible interest rate that can change depending on factors like inflation, market fluctuations, changes in the Reserve Bank of India benchmark rates, etc. In fixed interest rates, the interest payable remains constant throughout the loan tenure. At SMFG India Credit, we offer competitive loans against property rates that are determined as per each borrower’s profile and our policy.

9. Foreclosure Charges

Foreclosure means closing off or repaying a loan by repaying the outstanding principal amount (plus any dues) before schedule. Sometimes borrowers decide to repay the loan totally before the last EMI date. Lenders call it foreclosure. Lenders may levy a foreclosure charge for closing the loan before it is due. At SMFG India Credit, for LAP loans taken on floating interest rates for non business purposes, there are no foreclosure charges.

10. Processing Fee

A processing fee is an amount charged by a lender for processing the loan application. It includes charges towards collection, CERSAI charges, verification, documentation charges, etc.

You can consider SMFG India Credit’s property loan if you need a lumpsum amount for funding any personal or business need. Please note that the property you pledge must be owned by you and must be free of all claims/mortgages.

What are the Required Loan against property documents?

SMFG India Credit has a very simple documentation process. Here are some details:

1. PAN and Proof of Identity 
2. Address proof (residence and employment)
3. Bank statements of the past 6 months
4. Past 2 years ITR
5. Income proof (salary slips for salaried individuals, audited financials / income proof for business entities / self employed)
6. Property related documents
7. Depending on our policy at the time of loan application and your profile, we may also need additional documents.