What is a Mortgage Loan? Types & Process for Applying

Types of Mortgage loans

Secured loans have been gaining increasing popularity with each passing year, primarily because secured loans are low-interest loans that are highly affordable. A mortgage loan is a popular type of secured loan. Under this type of loan, a borrower pledges an immovable asset, i.e. a residential or commercial property, as a security in return for loan money from the lender. 

Home loans are a type of mortgage loan and so are loans against property. However, the primary difference between these two types of mortgage loans is that while the funds availed of under a home loan can only be used to buy a home, money obtained under a loan against property can be used for any purpose. 

In this article, we dig deeper into the different types of mortgage loans and how to apply for one. 

Different Types of Mortgage Loans-

If you are planning to avail of a mortgage loan, whether to buy a new property or arrange funds for some other purpose, you must understand the different types of mortgage loans available to you before beginning the application process. Here are the different types of mortgage loans available. 

Simple Mortgage

Under a simple mortgage loan, a borrower pledges their property as collateral in return for loan money. The lender holds the property papers but does not get ownership rights. However, the lender can sell the property for recovery of loan money in case the borrower defaults on EMI payments for an extended period. The lender must, however, give prior notice to the borrower and also give them ample time to arrange money to save their property before putting it out for auction. 

Usufructuary Mortgage

Under a usufructuary mortgage loan, the lender gets full property rights. Therefore, the lender can rent out the mortgaged property and earn money from it. However, borrowers must know that even under a usufructuary mortgage, the lender does not get full ownership rights but only temporary rights over the property. 

English Mortgage

Under this type of mortgage loan, if a borrower fails to pay EMIs for a continued period or is unable to repay the loan in full within the tenor mentioned on the loan agreement, the ownership rights of the property get automatically transferred to the lender. 

Sub Mortgage

Sub-mortgage loans are extended to those borrowers who do not have a decent or reliable credit history but still wish to avail of a loan. In this situation, the lender extends a loan offer to the aspiring borrower but does so at interest rates higher than normal. This is known as Sub Mortgage. 

Mortgage by Conditional Sale

Under this type of mortgage, the borrower agrees with the lender to clear the loan by a specific date and year. If the borrower is unable to honour this commitment, the complete ownership of the pledged property passes to the lender. However, if the borrower is able to meet the deadline, the lender must return all property papers to the borrower. 

Other than these different types of mortgage loans, in India, one can avail of some other types of mortgage loans as well. These are: 

Commercial Purchase Mortgage Loan

Businessmen and entrepreneurs opt for this type of loan. Under a commercial purchase mortgage loan, a lender loans money to a borrower who can use it only to buy a commercial property. The lender does not get ownership rights of the property but can sell the property for loan recovery in case of a payment default. 

Second Mortgage or Top-up Loan

Under this type of loan, a borrower takes a second loan against a property that they have already mortgaged before and have taken a loan against. Second mortgage loans are also known as top-up loans. However, borrowers must know that one can avail of second mortgage loans only from the lender from whom they had availed of the first loan or also from another lender but only after transferring their first loan to this lender. 

Reverse Mortgage

A reverse mortgage is a type of mortgage loan that has been recently introduced in India. This type of loan is only available to senior citizens. Under a reverse mortgage, the senior citizen can mortgage their property for a steady income every month. The lender is responsible for providing this steady income to the senior citizen. After the death of the borrower, the lender sells the property, deducts the amount lent out from it, and must transfer the remaining money to the heirs of the deceased borrower. 

Mortgage Loan: How to Apply

The process of applying for a mortgage loan is quite simple. Start by doing primary research and deciding the type of loan you want. 

Once you know which mortgage loan is the ideal choice for you, start searching for lenders. Talk to different lenders and see who is offering you the best deal. Go with the lender offering you the best interest rates. However, make sure your chosen lender is reputed and reliable. 

Begin the application process — go to their website and open the online application form. Fill out the form with details, such as name, address, PIN code, income details, etc. Submit the application form and someone from your chosen lender’s team will call you within the next 24 hours and help you complete the application process. You can expect to have funds disbursed into your account within 2-3 days of completing the application submission and receiving approval.