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Mortgage loans are high-ticket credit facilities wherein borrowers need to provide an asset they own as collateral with financial institutions. The loan is then offered, calculated against the value of such property. Reverse mortgage loans follow a similar underlying principle. However, these two credit facilities – reverse mortgage and mortgage loan – can be distinguished based on a few grounds. Difference between mortgage loan and reverse mortgage loan 1. Targeted borrowers The Indian government introduced the reverse mortgage scheme in 2007 specifically for the senior citizens of the nation. In most cases, this demography comprises retired individuals who do not hold a significant source of income post-retirement. This scheme facilitated such individuals to meet their lifestyle expenses by mortgaging their residential properties against periodical loans from the respective financial institution. On the other hand, a loan against property is not specifically designed for any age group but instead acts as a financing option for large expenses. 2. Repayment method In the case of reverse mortgage loans, borrowers do not need to repay the loan amount during their lifetime. Instead, when a borrower and his/her spouse passes away, the respective financial institution sells off the property to realise the repayment amount. A borrower availing a loan against property needs to repay such loan through EMIs within a specific tenor, usually ranging up to 20 years or amounting to 240 EMIs. 3. Ownership of mortgaged property The financial institution assumes permanent ownership of the mortgaged property by default in case of a reverse mortgage loan in India, barring the instance where a borrower or anyone related to such individual repays the loan amount to assume ownership back. Conversely, in case of a loan against property, a financial institution only assumes ownership of a property until the repayment is made in full. Henceforth, individuals shall duly assess their property ownership objectives before applying for either a reverse mortgage or a mortgage loan.
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Loan against property is a secured credit that is provided by financial institutions against mortgaged commercial or residential property. The loan against property rates can differ between various financial institutions.
Assets that covers loan against property are-
The loan against property interest rate depends on the amount that is being approved, the location of the property, borrower’s creditworthiness, repayment tenor, current market value of the property etc. The principal amount of a loan against property is decided based on the value of the mortgaged property. Tips to reduce the interest rates of loan against property Home loans interests can be reduced by following simple steps, like -
Usually, the interest stays lower compared to other unsecured forms of credits, like personal and business loans. Moreover, borrowers can select from fixed v/s floating rate of interest, depending on their repayment capability and requirements. Floating interest rates usually stay 1% to 2% lower than fixed rate, however, it may change because of market fluctuations. Fixed rates of interest is better suited for individuals who would prefer a fixed EMI amount for the duration of the repayment tenor.
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The Padho Pardesh education loan scheme provides credits with interest subsidy to the eligible students from economically weaker minority communities. The minority community includes Muslims, Buddhists, Christians, Sikhs, Parsis, and Jains. They can avail this government back subsidy plan to pursue higher education overseas, including Ph.D., Masters, MPhil, and other courses. Here are some facts about Padho Pardesh-
Candidates must submit income proof along with the application to substantiate this claim.
Nonetheless, for a higher loan amount up to Rs.3.5 crore, students can opt for a loan against property. Under the Padho Pardesh scheme process, meritorious students can facilitate with interest subsidy on an educational loan to build their career in 41 pre-determined subjects covering arts, humanity, science, and advanced studies. It is a great initiative undertaken by the Government of India to assist the underprivileged across the nation |