How Does a Mortgage Loan Work - Meaning, Process and Types

• A mortgage loan is secured against a property offered as collateral
• The lender assesses the borrower's repayment capacity, credit profile and property value before approval
• The loan amount depends on factors such as property value, income, credit profile and lender's policies
• The borrower repays the loan through EMIs consisting of principal and interest
• The borrower generally continues to use the property during the loan tenure
• Once the loan is fully repaid, the lender releases its charge over the property

A mortgage loan is a secured borrowing arrangement in which a property is used as security for the loan. In India, the term mortgage loan is commonly used for a loan against property, where an existing residential or commercial property is pledged to raise funds for eligible personal or business requirements.

The borrower generally continues to own and use the property while repaying the loan. However, the lender has a legal interest or security over the property until the loan is repaid according to the agreed terms.

A mortgage loan works by allowing the borrower to use the value of an eligible property as security for borrowing. The lender evaluates both the borrower and the property before deciding the loan amount and terms.

Here is the process:

The eligible mortgage loan amount is not based only on the property's market value. Lenders consider several factors, including:

• Market value of the property
• Applicant's income and repayment capacity
• Existing loans and financial obligations
• Credit history and credit score
• Age of the applicant
• Type and location of the property
• Property ownership and title
• Lender's loan-to-value and internal lending policies

The borrower generally continues to possess and use the property during the mortgage period, subject to the terms of the loan and mortgage arrangement.

However, the property serves as security for the outstanding loan. This means the borrower cannot treat the property as completely free from the lender's security interest until the loan is closed. The lender's rights are primarily connected to recovering the outstanding debt if the borrower fails to meet the repayment obligations. 

Bajaj Finance offers a mortgage loan in the form of a loan against property, where an eligible residential or commercial property is mortgaged as security against the loan. Borrowers can use the funds for various personal or business-related financial requirements, subject to the applicable terms. The loan amount can go up to Rs. 15.50 crore, depending on factors such as property value, income and repayment capacity.

Features and benefits of loan against property

• Loan amount of up to Rs. 15.50 crore* -Manage your urgent financial needs with a sizeable loan amount of up to Rs. 15.50 crore sanctioned based on your mortgaged property.
• Low interest rates - Our loan against property comes with affordable interest rates starting from 7.5% to 14.25% (fixed or floating rate of interest) p.a.
• Disbursal in 72 hours* - Get money in your bank account within 72 hours*- of the approval & subject to receipt of all applicable documents and basis risk policy.
• Tenure of up to 15 years* - You can repay your loan amount conveniently with a repayment tenure ranging up to 15 years.
• Multiple end-use options - With no end-use restrictions, use the loan amount for an emergency or pay for wedding expenses, higher education or business expansion.

Whether you’re expanding your business or funding your child’s education, Bajaj Finance Loan Against Property can help you meet your financial needs while continuing to use your property. Get a loan of up to Rs. 15.50 Crore* against your property, with disbursal within 72 hours of approval, subject to applicable terms and conditions.

Below is the eligibility criteria for a mortgage loan by Bajaj Finance:

A mortgage is a legal arrangement that uses an interest in immovable property as security for a loan, debt or other financial obligation. It is different from an outright sale because its primary purpose is to secure repayment. Understanding the type of mortgage, repayment obligations, documentation, default provisions and right of redemption can help borrowers make informed property-financing decisions.

*Terms and conditions apply.

Follow these steps to apply for a mortgage loan by Bajaj Finance:

1. Enter your personal details

   Provide your basic personal information to begin the application.

   
   

2. Provide property details

   Enter the required details about the property you plan to offer as security.

   
   

3. Check your eligibility

   Check your eligibility in a few seconds without impacting your credit score.

   
   

4. Review your loan offer

   Review the loan amount, interest rate, tenure and other offer details. If everything looks suitable, proceed with the application.

A mortgage loan works by allowing a borrower to raise funds against an eligible property offered as security. The lender assesses the borrower's financial profile and the property's value and legal status before approving the loan. Once approved, the borrower repays the amount through EMIs comprising principal and interest.

Because the property is used as collateral, borrowers should compare the interest rate, loan amount, tenure, charges and repayment obligations before applying.