Not many loan options fare well as a mortgage loan when it comes to balancing your financing need with optimum affordability. These loans are not only sufficiently abundant in the values provided but also come with simple terms that make financing management easy. Moreover, you can choose a suitable mortgage financing option to meet your expenses depending on the financing need you have. Various regulatory changes made to the framework of the Indian lending market lately have only worked in favour of these loans and made them appealing among the borrowing class.

These loans are, however, also surrounded by some critical intricacies that leave a significant impact on one’s finances. It is thus best that you gather all necessary info related to mortgage financing when planning to avail these loans. So, let’s start with the meaning of these advances right out.

What is Mortgage Financing?
To understand what a mortgage loan comprises as its meaning, it is crucial to first gain an in-depth idea on the term ‘mortgage’. Under the secured loan financing system, mortgage is only one type of secured financing system. The term ‘mortgage’ in itself means the creation of a collateral which is based on fixed assets.

So, a mortgage advance is a type of financing framework within which fixed assets, typically residential and commercial properties, are used as security to raise funding. Other fixed assets can lead to mortgage creation as well. However, when it comes to household or professional financing, only the two mentioned above are accepted as collateral by lenders largely.

Under the loan arrangement, an individual needs to apply with the necessary eligibility and provide an eligible asset as mortgage to avail financing. Once the loan is approved, the financing value is transferred to the agreed receiver and repayment begins in EMIs determined as per the lender’s amortization schedule. The borrower needs to make EMI payments in time and in full, failing which attracts penalty for every EMI missed. Once repayment of the total loan liability is complete, the lender releases the asset provided from mortgage. As a proof of such release, a borrower needs to obtain an NOC from the lender.

As a consequence of complete failure in loan repayment, the lending institution reserves the right to auction the mortgaged property for loan liability recovery as far as the loan amount is due. In case such auction yields a higher value than the loan repayment outstanding, the lender provides such an additional amount raised to the property owner.

Types of Mortgage Loan
While lenders provide mortgage loans under different types, household financing identifies these loans under two prominent categories. They are as under –
1. Home loans
Home loans are types of mortgage advances dedicatedly provided to make house purchase possible for those in need of funding for the purpose. These advances are provided against the mortgage of residential properties only. Once you have agreed to a certain house property purchase and acquired seller proof, you can finance its purchase through the same property’s mortgage. The financing so approved is directly provided to the seller and not to the borrowing individual, which keeps the funding framework working through a binding of all three parties to separate agreements.

2. Loans against property
A loan against property is a type of mortgage loan that facilitates funding against either residential or commercial properties as collateral. Under this loan arrangement, the same mortgage principals apply with the difference that the borrower provides a pre-owned property as mortgage and no new property is bought under the agreement. The financing so availed is thus available for use for any funding need of the borrower without any lender-based restriction.

Property loans thus come with greater flexibility of use than home loans, while the latter is preferable when your financing need is related to house purchase.

Both these loan options attract reduced interest rates due to their secured nature and require an individual to meet simple eligibility criteria. Positive credit score, even though not mandatory, is what lenders look forward to for determining borrower creditworthiness.

When applying for a mortgage loan, make sure to keep all personal, income, and occupation-related documents ready as lender assessment of your borrowing profile is based on them. Also, make sure to check loan affordability based on the amount and tenure selected before you apply for the advance.