What is Loan Against Property (LAP)?

April 11, 2022 | Indextapadmin

Residential property is an asset that not only provides you with space to live your life but can come in incredibly handy and proves to be useful during times of need. For instance, if an apartment owner needs cash urgently, it’s not necessary to apply for expensive personal loans; but instead, the individual can opt for Loan Against Property (LAP) to handle the financial emergency. 

What is Loan Against Property?

What is LAP? In essence, a Loan against Property is a unique tool that can make use of the complete monetary potential of a person’s immovable asset while continuing to hold its title. One of the means to secure funds is LAP, similar to project loans or overdraft limits, home loans, and so forth. 

In India’s housing finance universe, LAP is essentially a home loan that can be taken against a property that you own. Thanks to the relatively longer tenure and reduced interest rates, it has become a popular type of long-term loan, particularly among the self-employed in this country. 

Eligible Properties

When it comes to Loan Against Property India, it can be taken on residential, commercial, and industrial properties. When it comes to a residential property, it could constitute rented-out properties, self-occupied properties that comprise apartments/flats or individual houses, and so on. You could be eligible for LAP as long as you own a plot or a land parcel. Essentially, LAPs are provided on freehold property and the owner needs to have a clear title to it. 

Amount of Loan 

Banks only provide a specific percentage of your property’s market value as LAP. The LAP amount in India could differ between 90% and 70% of the property’s market value that depends on the bank from where the individual is taking the mortgage. 

The majority of the financiers maintain a loan-to-value ratio, in the case of LAP and LAP-OD. To decrease risk, a lot of banks deliver up to 50%-65% of the value of the property, while a couple of non-banking financial companies (NBFCs) can rise to 75%. 

It is vital to note that banks would dispatch their technical evaluators, to physically assess the property and determine its market value. Your financial standing is another significant aspect that is taken into consideration when deciding the loan amount. 

Therefore, your credit history, experience, age, number of assets and liabilities, repayment capacity, stability of business and income, and so forth would be taken into account when determining the LAP-OD loan amount. 

LAP Eligibility 

Who is eligible for LAP? There is a specific age and income qualification that borrowers need to meet, to mortgage their property. Financial institutions usually provide LAP to 2 types of borrowers:

Salaried Applicants 

Age: 33 to 58 years

Employer: multi-national company, a private company, and public company

Residency: India 

Self-employed Applicants

Age: 25-70 years

Income: Regularity of Income

Residency Status: India

If self-employed people want to take LAP against their 2 BHK flats in Mumbai, they need to be able to demonstrate proof of their earning record of three years, typically through income tax returns.

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