A mortgage loan is a type of loan used to purchase or refinance real estate, where the property itself serves as collateral for the loan. It is typically a long-term loan, with repayment periods ranging from 1 to 20 years, and is repaid through monthly installments consisting of principal (the original loan amount) and interest (the lender’s charge for lending).
Features of a Mortgage Loan

  1. Loan Tenure:Typically ranges between 10 to 30 years.Longer tenures result in lower monthly installments but higher interest costs overall.

  2. Collateral Requirement:The property being purchased or refinanced acts as security for the loan.

  3. Interest Rate Options:Fixed Rate: Interest remains constant throughout the loan term.Variable/Adjustable Rate: The interest rate fluctuates based on market conditions.

  4. Down Payment:A 5-20% payment of the property’s value is required upfront.

  5. Amortization:Loan repayment follows a scheduled plan where each installment covers both principal and interest.

  6. Loan-to-Value (LTV) Ratio:Defines the percentage of the property value the lender can finance, typically 75-90%.

  7. Prepayment Option:Borrowers can make extra payments to reduce the loan principal, though some loans may have prepayment penalties.

Benefits of a Mortgage Loan

  1. Affordable Home ownership:Enables buyers to purchase real estate without paying the entire amount upfront.

  2. Lower Interest Rates:Mortgage loans generally have lower interest rates compared to unsecured loans, as the loan is secured by the property.

  3. Tax Benefits:Interest paid on mortgage loans is often tax-deductible, providing savings on income tax (subject to local regulations).

  4. Flexible Repayment Tenures Borrowers can choose a tenure that suits their financial situation, offering flexibility in monthly installments.

  5. Build Equity:As you repay the loan, you gain ownership equity in the property.

  6. Refinancing Options:Borrowers can refinance their mortgage to secure better interest rates or modify repayment terms.

Documents Required for a Mortgage Loan

  1. Identity Proof:Passport, Aadhaar card, Driver's license, or PAN card.

  2. Address Proof:Utility bills, Passport, Rental agreement, or Aadhaar card.

  3. Income Proof: For Salaried Individuals:Salary slips for the last 3-6 months.Bank statements for the last 6 months.Income tax returns (ITR) or Form 16.For Self-Employed Individuals:Profit & Loss statements and balance sheets.Bank statements for the last 12 months.ITR for the last 2-3 years.

  4. Property Documents:Sale agreement, Title deed, Property tax receipts, and NOC from the builder or housing society.

  5. Employment Proof:Offer letter or Employment contract (for salaried individuals).

  6. Credit Report A credit score report showcasing the borrower’s credit history and repayment behavior.

  7. Photographs: Recent passport-sized photographs.

  8. Processing Fee Receipt:Some lenders require payment of a non-refundable processing fee during application.