Loan Against Property

Loan against property: what you should know

A loan against property (LAP) lets you raise a large amount for business or personal needs by mortgaging a residential or commercial property you own. You keep using the property, but the lender holds a charge on it until the loan is repaid. Because the loan is secured, tenures are usually longer and rates are generally lower than on unsecured loans. The risk is higher, though: if you default, the lender can enforce its security.

Common uses and variants

• Business needs – expansion, working capital or buying equipment.
• Personal needs – education, a medical emergency, a wedding or consolidating high-cost debt. Lenders ask you to declare the end use and some uses are not permitted.
• Residential or commercial property – self-occupied, rented or, with some lenders, vacant property.
• Lease rental discounting – a related product for owners of rented commercial property, where the loan is based on the rent.
• LAP balance transfer – moving an existing LAP to another lender, sometimes with a top-up amount.

Who is it for?

Salaried and self-employed individuals, professionals and business owners who own property with clear title and have income that can support the EMIs. Lenders assess your repayment capacity as well as the property: a valuable property does not guarantee approval if your income is not enough.

Documents usually required

• KYC for all applicants and co-owners.
• Income proof – salary slips and Form 16, or ITRs and audited financials for businesses.
• Bank statements, usually covering 6–12 months.
• Property documents – title deeds and the previous chain of title, approved building plan, property tax receipts, and the society or builder NOC where applicable.
• Statements for any existing loans.

How Early Grow helps

1. We understand the amount you need, why you need it, and the property you plan to offer as security.
2. We make a first assessment of the likely loan amount, based on your income and an indicative property value.
3. We shortlist partner lenders whose property and income criteria you fit, and compare their terms.
4. We help you compile the documents and submit the application.
5. The lender carries out its own legal verification and technical valuation, and then decides on the sanction. We coordinate the visits and queries.
6. After you sign the agreement and create the mortgage, the lender disburses the loan.

Before you apply

• The amount you can borrow is a percentage of the lender’s own valuation, which may be lower than what you expect the property to fetch.
• Ask about the processing fee, legal and valuation charges, and any charges for creating or releasing the mortgage.
• Check whether the rate is fixed or floating, and what prepayment charges apply. For business-purpose loans these depend on your agreement and RBI rules.
• All co-owners of the property generally need to be co-applicants.