Types of Mortgage Loans in India

In India, mortgage loans are secured loans where a borrower pledges real estate as collateral to avail of funds. The types of mortgage loans cater to various financial needs, from buying property to funding personal or business expenses. Below are the common types of mortgage loans available in India:

1. Home Loan

Purpose: The most common type of mortgage loan used for purchasing a residential property (house, apartment, or land for construction).
Loan Amount: Typically up to 80-90% of the property’s market value, based on the lender’s assessment.
Repayment Tenure: Long-term, usually up to 30 years.
Interest Rates: Available in fixed or floating rates.
Tax Benefits: Interest paid on home loans is eligible for tax deductions under Section 24(b) of the Income Tax Act.

2. Loan Against Property (LAP)

Purpose: A type of mortgage loan where you pledge an existing residential, commercial, or industrial property to raise funds for personal or business purposes.
Loan Amount: Typically, up to 50-70% of the property’s market value.
Repayment Tenure: Medium to long-term, usually up to 15-20 years.
Interest Rates: Generally lower than unsecured loans because the property is pledged as collateral.
Use: Funds can be used for any purpose, such as education, medical emergencies, business expansion, or personal expenses.

3. Commercial Property Loan

Purpose: This loan is for purchasing or constructing commercial properties, such as office spaces, shops, or warehouses.
Loan Amount: Typically up to 50-60% of the market value of the commercial property.
Repayment Tenure: Usually 10-15 years, depending on the lender.
Interest Rates: Slightly higher than home loans due to the commercial nature of the property.

4. Land Loan (Plot Loan)

Purpose: A land loan is specifically used to buy a piece of land, either for constructing a house or for investment purposes.
Loan Amount: Generally, up to 70-80% of the value of the land.
Repayment Tenure: Typically 10-15 years.
Interest Rates: Often higher than home loans.
Restriction: The plot must be within a municipal or corporate limit and approved by the local authorities.

5. Home Construction Loan

Purpose: This loan is designed for individuals who want to construct a house on a plot they own.
Loan Amount: Up to 80-90% of the estimated construction cost.
Disbursement: Usually disbursed in stages based on the progress of the construction.
Repayment Tenure: Long-term, up to 30 years, like a home loan.
Interest Rates: Similar to regular home loans.
Use: Only for construction-related expenses.

6. Home Extension Loan

Purpose: Offered to individuals who want to extend or add extra rooms/floors to their existing residential property.
Loan Amount: Up to 80-90% of the extension cost, subject to the property’s market value.
Repayment Tenure: Medium-term, typically up to 15-20 years.
Interest Rates: Similar to home loans, with the possibility of fixed or floating rates.
Tax Benefits: Interest paid is eligible for tax deductions under Section 24(b) of the Income Tax Act.

7. Home Renovation Loan

Purpose: This loan is used to finance the renovation or repair of an existing home, such as interior upgrades, painting, or structural repairs.
Loan Amount: Up to 80-90% of the renovation cost.
Repayment Tenure: Shorter-term compared to home loans, typically up to 10-15 years.
Interest Rates: Slightly higher than regular home loans, but lower than personal loans.
Tax Benefits: Interest payments on home renovation loans are eligible for tax deductions under Section 24(b).

8. Reverse Mortgage Loan

Purpose: Designed for senior citizens (above 60 years), allowing them to mortgage their residential property to receive a regular income stream while retaining ownership of the property.
Loan Amount: Based on the property’s market value and the borrower’s age, typically up to 50-60% of the property’s value.
Repayment Tenure: Borrowers are paid monthly, quarterly, or as a lump sum until they either pass away or sell the property.
Interest Rates: Typically higher than home loans, with the loan amount growing over time as payments are made to the borrower.
Repayment: The loan is repaid when the borrower passes away or the property is sold by the heirs.

9. Lease Rental Discounting (LRD)

Purpose: This loan is for property owners who lease out their commercial property. The loan is secured based on the rental income from the leased property.
Loan Amount: Based on the discounted value of the future rental income.
Repayment Tenure: Short to medium-term, typically up to 10 years.
Interest Rates: Lower than regular loans because the rental income is pledged as security.

10. Balance Transfer Mortgage Loan

Purpose: This loan allows borrowers to transfer their existing mortgage loan (home loan, loan against property, etc.) to another lender offering better interest rates or loan terms.
Loan Amount: Based on the outstanding loan amount.
Repayment Tenure: It continues the repayment tenure of the previous loan, with the possibility of extending it if necessary.
Interest Rates: Usually lower than the original loan, making it cost-effective.

11. Top-Up Loan on Mortgage

Purpose: A top-up loan allows borrowers who already have a mortgage (home loan or LAP) to borrow additional funds over and above their existing loan.
Loan Amount: Up to 50-70% of the property’s value, considering the existing loan.
Repayment Tenure: Similar to the original mortgage loan, typically 10-20 years.
Interest Rates: Generally lower than personal loans, since the loan is secured by property.
Use: Can be used for personal or business purposes, home renovation, or debt consolidation.

12. Second Mortgage Loan

Purpose: A second mortgage loan is taken on a property that already has an existing mortgage. The borrower uses the same property to take out a second loan, either for personal or business needs.
Loan Amount: Up to 50-70% of the property’s market value, depending on the lender’s risk assessment.
Repayment Tenure: Generally shorter than the first mortgage, ranging from 5-10 years.
Interest Rates: Slightly higher than the first mortgage due to the increased risk.

13. Bridging Loan

Purpose: A short-term loan designed to bridge the gap between buying a new property and selling an existing one. It helps in managing the down payment or other costs of purchasing a new property.
Loan Amount: Based on the value of the property being sold.
Repayment Tenure: Short-term, typically 6-24 months.
Interest Rates: Higher than regular mortgage loans due to the short-term nature.

14. Non-Resident Indian (NRI) Mortgage Loan

Purpose: NRIs can avail of this loan to buy residential property in India. It is specifically designed to cater to the financial needs of Indians residing abroad.
Loan Amount: Up to 80-90% of the property’s value, based on income and creditworthiness.
Repayment Tenure: Long-term, similar to regular home loans, up to 30 years.
Interest Rates: Competitive rates based on market conditions.

Key Features Across Mortgage Loan Types:

Loan Amount: Based on a percentage (usually 50-90%) of the property’s market value.
Collateral: The property being purchased or mortgaged serves as collateral for the loan.
Interest Rates: Typically lower than unsecured loans because the loan is backed by property.
Repayment Tenure: Can range from short-term (6 months) to long-term (up to 30 years), depending on the loan type.

These mortgage loan types cater to a variety of financial needs, from buying residential or commercial property to raising funds for personal or business purposes using property as collateral. The choice of mortgage loan depends on the borrower’s financial goals and the type of property involved.