Are you facing a financial crunch? Are you in dire need of money but don’t have the means to accomplish your desires? You can lend your property and ask for a loan in turn. Property lending or mortgage is the kind of loan in which the property of the borrower is kept as collateral. The borrower has to enter into an agreement with the source from whom he is lending money. The lender, which is usually a bank, agrees to make the payments for a certain span of time until the borrower is again capable of paying the amount back to the lender. This kind of loan is usually sanctioned in the form of a home loan so that one can purchase his dream home with ease.
Common Features of All the Lenders Offering Mortgage Loan
All the lenders who offer money in exchange for property lending, have two common features:
- The principal: This is the most important feature of any loan. The term “principal” refers to the amount of money which you are borrowing g from the lender.
- Interest: The second feature which determines the loan amount is the interest rate. This refers to the money which you pay for using the money which you have borrowed. This factor is highly volatile. The interest amount that you pay for the loan depends on a number of factors.
How Does Property Lending Work?
The borrowers who apply for mortgage loans are usually in dire need of money. They have to make a hefty investment but don’t have enough means to accomplish their desire. In such cases, they use their property as collateral and borrow cash from the bank or any other lending source.
Different lending sources offer different kinds of property lending loans in exchange for personal property. The buyers have to assess which is the best deal for them before they settle for any of the plans.
One lender may not be able to take your circumstances into consideration. It is advisable to search around and look for the best deal in the market.
Types of Property Lending Loans
The kinds of property lending loans are differentiated on the basis of their terms, rates of interest and the repayment amount for each period. The term usually ranges between 5 years to 30 years. However, some of the institutions also offer a loan for a term as much as up to 50 years. The rate of interest varies largely from lender to lender.
The different kinds of mortgage loans are Simple mortgage, Usufructuary mortgage, Mortgage by sale on condition, Mortgage by the deposition of titular deeds, Anomalous mortgage and English mortgage.
Features of Property Lending Loans
Given below are the features of property lending loans:
- The tenure is long. This makes the repayment of the debt easy.
- Both salaried employees and self-employed people can apply for a loan in exchange for property lending.
- These loans help to build a good credit score.
- Property lending loan makes it easy for a person to take a step towards their big dreams which require heavy investments.
- The EMI options are smaller, thereby, not putting a financial strain on the borrower.
- This is a secured form of a loan as a person is keeping his secured property as collateral. It is due to this reason that the rate of interest is usually lower.
If a person is unsure about his ability to repay the amount, he should not borrow money keeping his personal property as collateral. This is because if the person fails to repay the amount, the property will be seized by the lending source and sold in order to redeem the amount. Thus, we can see that property lending loan has both its pros and cons are mixed proportionally.