Do you need a lump sum amount for your business? Have you considered leveraging the value of your property to meet such fund requirements? A loan against your home or office is an excellent option to raise a lump sum amount. Lenders provide the money by mortgaging your property at an affordable rate of interest. However, here are five rules you need to follow before you avail of such a loan:

1. Borrow based on your financial situation

No Equated Monthly Installments (EMIs) on your outstanding loans must exceed 65% of your net income. Therefore, you should consider your repayment capability before you apply for a larger loan against property (LAP) amount.

2. Choose a shorter loan repayment tenure

Sammaan Capital provides LAP with a repayment period of up to 15 years. When you choose a longer repayment tenure, the EMIs may reduce, which may be tempting. However, you will pay a significantly higher interest over the longer duration. If your current financial situation does not allow you to choose a higher EMI, you may increase the same in the future as your annual income rises. Sammaan Capital EMI calculator can give you an estimate of your EMIs based on the loan amount, tenure and interest rate.

3. Make timely repayments

When you delay the EMI payment, lenders often levy a penalty, which increases the overall cost of your borrowing. Moreover, late payments are shown in your credit score, which reduces your probability of availing a loan in the future. Therefore, to avoid such unpleasant situations, it is important that you pay the EMI in a timely manner.

4. Avail of insurance when you borrow a larger amount

When you avail of a mortgage loan, you assume a debt for the long-term. It is recommended you avail of insurance to cover the borrowed amount. Therefore, if an unfortunate event occurs during the loan tenure, your family members do not suffer from any financial difficulty while repaying the outstanding amount or worse lose the property due to non-payment.

5. Read the terms and conditions carefully

Often, the loan document is huge and cumbersome and you may not like to read the complete file. However, it is very important that you read all the terms and conditions carefully to avoid any nasty surprises in the future. There may be additional fees and charges, which increases the cost of your borrowing. Understanding all such terms and conditions is crucial to make an informed decision. When you apply for a LAP, you will need to submit certain documents to the lenders. Here is the list of common documents needed to avail of a LAP:

• Duly signed and completed application form
• Income proof – salary slips, Form 16, and bank account statement (for salaried applicants). Bank statement, financial statements, and income tax returns (if you are self-employed)
• Know-your-customer documents – identity, signature, address, and name and birth date proof
• All documents related to the title of the property
• Check for the processing fees

Applying and availing of a LAP is a fairly quick and simple procedure. You may apply directly through the lender’s’ website or via an agent. However, it is very important that you work with a renowned and reputed agent or institution to avoid any complications in the future. You may read reviews and comments provided by other borrowers to make the right decision. Working with someone reliable is crucial because you do not want your confidential information and documents to fall into incorrect hands as the same could be misused. This holds true for any kind of Home Loan.