Many consumers choose a mortgage when they need funds. Loans in which an asset is offered as collateral are cheaper than unsecured loans. Therefore, many borrowers in urgent cases choose a loan against gold or a fixed deposit. But if you are looking for a significant amount, then one of the preferred options is a secured real estate loan.
According to Paisabazaar.com, interest rates on real estate loans start at 8.2%. But they can go up to 14.5%, depending on the lender, the client’s credit profile and the property. Although Bank of Baroda is among the lenders offering higher rates, the maximum interest rate it charges is also high. The interest rate starts at 8.2% and reaches 13.85%. The Indian Bank, on the other hand, offers rates ranging from 10.5% to 10.65%.
As a borrower, be mindful of handling fees, maximum loan amount, and the length of time you own this product. Use these three criteria as a key to choosing a lender.
Lenders charge between 0.5% and 2% of the property value as a processing fee. However, they have a limit on the maximum fee they will charge. For example, Bank of Baroda charges a maximum processing fee of ₹1.5 lakhs, State Bank of India and Bank of Canara charge maximum ₹50,000.
There is also a limit on the minimum and maximum loan amount. Bank of Maharashtra, Karur Vysya Bank and Tata Capital offer a maximum loan amount of up to ₹3 crores. Some lenders such as Bank of Baroda, Union Bank of India and Canara Bank offer maximum loan up to ₹10 crores.
Most lenders provide a maximum term of 15 or 20 years. However, Bank of Maharashtra and Canara Bank offer loans for up to 10 years, and Karur Vysya Bank for up to 100 months (just over eight years).
Processing fees and tenure can have a significant impact on your credit. Difference in ₹The handling fee of 1 lakh is significant. The difference in terms can affect the Equalized Monthly Contribution (EMI) as well as the total loan amount.
Suppose the borrower takes out a loan of ₹50 lakhs at a rate of 10% for 10 years. EMI will come to ₹66,075, and the total interest expense will be ₹29.29 lakh. If the same loan is for 20 years, EMI will come to ₹48,251, and the total interest expense is ₹65.80 lakh. So, strike a balance between the two.
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