What is Mortgage Loan?

Created on 21 Apr 2022

Wraps up in 5 Min

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Updated on 13 May 2023

“Nikal Jao is Ghar se, Varna Dhakke maar ke bahar nikal dunga!” We have heard this kind of dialogue in a variety of Bollywood films. Why is the protagonist being thrown out of his own home, though? This can happen to you too 😨. In the modern world, many people get loans by putting their own houses at risk. Yes, you can get money ‘apne ghar ko girvi rakh ke’ and you can do it with the help of mortgage loans. 

In today’s blog, we discover “what are mortgage loans?”, “how do they work?”, and how you can apply for them and wisely manage them without sabotaging your personal creditworthiness and your wealth. And especially so that you do not ever get kicked out of your house.

Understanding Mortgage Loan

A mortgage loan is a secured loan in which the borrower offers an immovable asset such as a house or land as collateral to the lender in exchange for a loan.  The borrower is given possession and ownership of the asset for which they take the loan. The asset is kept by the lender until the borrower has paid the mortgage in full, plus interest.However, in the event that the borrower is unable to repay the loan, the lender has the right to sell the collateral in order to cover his losses.

This is a very popular source of financing as by use of a mortgage one can avail of a substantial loan at cheaper interest rates and can easily gain a lengthy tenure for repayment. A mortgage loan is a convenient way to raise finance as compared to other sources.

There are basically three types of mortgage loans

  • Home loans

A home loan is a form of mortgage loan taken out by a borrower solely for the purpose of constructing or purchasing a home. The money borrowed cannot be used for any other purpose. For the duration of the loan, the house itself is treated as collateral. If the borrower fails on the loan, the lender takes possession of the property, which can then be sold to recover the outstanding loans.

  • Commercial Property Loans

This is a sort of commercial mortgage loan that is approved for the construction or purchase of business property. When a lender applies for a loan, he does not have to present any collateral; instead, his creditworthiness is assessed. After that, the purchased commercial property serves as collateral and can be sold if and when the borrower defaults on the loan.

  • Loans Against Property

This is the most unique kind of mortgage loan. Unlike the two mentioned above, Loans against property need not have any specific use for buying a property, it can be used for any personal use like child’s education, marriage, other personal expenses or anything. Here any existing property needs to be provided as collateral for the loan availed. As naturally it is riskier and the chance of default is higher for such personal loans, the interest rate is higher as compared to home loans or commercial property loans.

There is a slight but significant difference between a traditional home loan and vs Mortgage Loan. Let's look at it from a comparative point of view.

Home Loan VS Mortgage Loan


Home loan

Mortgage loan


Used only for the construction or buying of a new house property.

No restriction on how the amount is used, it can be used for personal as well as business use.

Loan to value ratio

The loan can be availed for  upto 90% of the property’s market value.

This loan can only be availed upto 60-70% of the property’s market value.

Interest rate

Lower compared to mortgage loans.

Generally 1-3% higher than home loans.

Repayment tenure

Up to 30 years

Up to 15 years

How to apply for a mortgage loan?

With the advent of the online culture, the process of applying has become so easy and hassle-free. Now we can apply for a mortgage loan in the comfort of our air-conditioned rooms and relationship managers are available at the convenience of our phones who can process loans up to Rs.10 crore. Let us guide you through the process of applying for a mortgage loan and the things to keep in mind before applying for one. The specific conditions and the process for availing of a mortgage loan can be found on the website of your bank or NBFC. But the general steps for applying for a mortgage are-

  • Fill the online form- You need to fill the online loan-against property form, and enter all the necessary personal Information relating to your Income, Wealth, the details of the property you are willing to mortgage. You can get any offline form at your bank branch as well and it can be submitted there as well.

  • Provide necessary documents- Attach necessary documents required for the KYC and income proof that is needed to assess the creditworthiness and for the underwriters to decide the amount of loan that can be given.

The basic documents needed to be provided are-

  • PAN Card

  • Aadhar Card

  • ITR of the last 2-5 years depending on the requirement by the lender

  • Proof of ownership of the property

  • Insurance of the property. The mortgaged property must be compulsorily insured for an amount not less than the value of the property.

  • Checking of documents- The documents are later verified and the property is inspected to find out the fair value, and then on the basis of the creditworthiness of the individual, the amount of the loan is decided. The amount can vary from 30-to 90% of the value of the property.

  • Decision on the Interest rate and the Repayment terms- In the next step the tenure of the mortgage is decided by the borrower and the repayment terms are agreed upon for the final approval.

  • Funds Transferred- After the approval from the underwriter and acceptance of terms and conditions by the borrower, the funds are then transferred to the borrower's account.

Additional Things to keep in mind

  • The applicant must be of age 25 years or above.

  • The applicant must be self employed or salaried, with a stable income source.

  • Be a resident of India and living in India.

  • Loan can be availed jointly with a co applicant as a partner or any other family member.

Parting Words

In conclusion, mortgage loans are a popular and effective way to finance a home purchase. They provide a means for individuals to own their dream home without having to pay the full amount upfront. With the availability of different types of mortgage loans, borrowers can choose a loan that best suits their needs and financial situation. However, it is important to carefully consider the terms and conditions of the loan, including the interest rate, repayment period, and associated fees, before making a decision.

Borrowers should also ensure that they have a good credit score and a stable income to increase their chances of approval and avoid defaulting on the loan. Overall, mortgage loans can be a great tool for achieving homeownership and building equity over time, as long as they are used wisely and responsibly.

Do let us know in the comments below, on which topic you would like our next blog to be on.

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Deb P Samaddar

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If people could be named after idioms, Deb would be called "I'm all ears." His brain is a storehouse, ever overflowing with derelict information. So, while most things he talks about are as useless as occasion-less greeting cards, everything he writes has the potential of bagging you multiple diplomas!

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