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Know the Different Types of Mortgage Loan

Updated: July 19, 2022
Know the Different Types of Mortgage Loan

A mortgage loan is the most common type of loan in India and is availed by all classes of users, whether it is retail or business. They are popular among users because one can get a sizable amount of loan at relatively lower interest rates, with longer and more flexible repayment tenors. Let’s discuss the type of mortgage loan available in India.

What is a Mortgage?

A mortgage refers to the act of offering a self owned fixed asset as a guarantee or collateral to the lender against the loan availed. For example, pledging your own house or commercial property as collateral to avail a loan against property. Similarly, borrowers taking a loan to purchase a home or commercial property will need to pledge the purchased property as a collateral for the loan.

A mortgage-based loan is the most secure type of loan and lenders offer a lower interest rate on such loans as the risk of loss is much lower as compared to an unsecured loan.

Another fact of mortgage-based loans is that they can usually be availed only by pledging unmovable or immovable assets, like land, house property, commercial property, etc.

How Many Types of Mortgages are there?

There are many different kinds of mortgage loans available in India. They are:

  1. Simple Mortgage
  2. Usufructuary Mortgage
  3. English Mortgage
  4. Mortgage by Conditional Sale
  5. Mortgage by Title Deed Deposit
  6. Anomalous Mortgage

1. Simple Mortgage Loan:

It is the most common type of mortgage in India, where both the lender and the borrower enter into an agreement that in case of non-repayment, the lender has the right to sell the property to recover dues. However, the possession of the property remains with the borrower.

2. Usufructuary Mortgage:

In this type of mortgage, the possession of the asset is transferred to the lender, who enjoys the rent or profit from it, without creating any additional liability on the borrower.

3. English Mortgage:

In this case, the borrower transfers the property to the lender upon availing of the loan. Upon repayment of the loan in full, the lender transfers the property back to the borrower. The sale transaction is absolute from the beginning.

4. Mortgage by Conditional Sale:

It is similar to an English mortgage, but with a condition. The lender can only sell the property when the borrower defaults. The sale transaction is not final initially and is dependent on future events.

5. Mortgage of Title Deeds Deposit:

This form of mortgage is more common in a housing loan, where the borrower deposits the title deeds of the property with the lender to avail of the loan. The memorandum of deposit of title deeds is signed, where the lender is made a party to the transaction. This gives the lender the power to repossess and sell the property to recover the dues in case of default.

6. Anomalous Mortgage:

A type of mortgage, which does not have any definition or falls under any types of mortgage in India discussed above.

Mortgage Loan by Grihashakti

We offer mortgage loans under multiple segments including home loans, commercial property loans, and loans against property (residential and commercial property) to eligible applicants.

Under the home loan segment, home construction loans, home extension loans, home improvement loans, and home purchase loans are offered. The memorandum of deposit of title deeds (MOD) mortgage type is used while advancing home loans.

Under commercial property loans, commercial property construction loans and commercial property purchase loans are offered to commercial enterprises.

And, loans against property or LAP loans are offered on both residential and commercial enterprises.

The mortgage loan offered under different segments comes with rapid approval and quick disbursal feature, flexible tenure, and affordable interest rates.

Things to Note Before Applying for a Mortgage Loan

Availability of a mortgage loan is the biggest financial commitment one makes and is more than just qualifying for the loan.

Mortgage loans come with long repayment tenure, which makes them affordable and attractive for borrowers. The following points you should note while applying for a mortgage loan:

  • Your current financial situation
  • Your future financial position
  • Repayment capacity
  • Interest rates
  • Mortgage payments
  • Mortgage size
  • The extent of increase or decrease in the value of your home or property decrease in the future
  • And, your personal tolerance level for debt and risks

Bottom Line

Despite being an easy source of finance, you should look at all the aspects before applying for a mortgage loan, like a home loan. Because in case of non-payment of dues, you will not only lose your home property but also your credit score will be impacted negatively.

Use calculators and tools like home loan eligibility calculator, loan against property eligibility calculator, home loan EMI calculator, and APR calculator to know your eligibility and affordability for mortgage loans. It will help you to plan accordingly and reduce the risks involved.

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