Introduction
A mortgage loan is one of the most common ways to finance a home purchase in India. Whether you are a first-time homebuyer or looking to invest in property, understanding the ins and outs of mortgage loans can help you make informed decisions.
In this guide, we’ll cover:
✅ What is a mortgage loan?
✅ Types of mortgage loans in India
✅ Eligibility criteria
✅ Interest rates & repayment options
✅ Pros and cons of mortgage loans
✅ Tips to get the best deal on your home loan
What is a Mortgage Loan?
A mortgage loan is a secured loan where a borrower pledges property (residential or commercial) as collateral to secure funds from a lender. In India, home loans are the most common type of mortgage loan.
Banks and NBFCs (Non-Banking Financial Companies) offer mortgage loans with varying interest rates, tenures, and repayment terms. The property remains under the lender’s lien until the borrower repays the full loan amount.
Types of Mortgage Loans in India
There are several types of mortgage loans in India, each catering to different financial needs:
- Home Loan – For purchasing, constructing, or renovating a residential property.
- Loan Against Property (LAP) – Borrowing money by pledging an owned property as collateral.
- Reverse Mortgage Loan – A scheme for senior citizens where they can pledge their home to receive regular payments from a bank or lender.
- Commercial Property Loan – Used to purchase or construct commercial real estate.
- Home Construction Loan – Specifically for constructing a house on owned land.
Eligibility Criteria for a Mortgage Loan
Lenders evaluate several factors before approving a mortgage loan. The general eligibility criteria include:
🔹 Age: 21 to 65 years
🔹 Income Source: Salaried or self-employed
🔹 Credit Score: Minimum 700 (higher scores improve approval chances)
🔹 Employment Stability: At least 2-3 years of work experience
🔹 Loan-to-Value (LTV) Ratio: Usually 75%-90% of property value
🔹 Debt-to-Income Ratio: Ideally below 40%
💡 Pro Tip: Maintaining a strong credit score and stable income improves your chances of getting a lower interest rate on your mortgage loan.
Mortgage Loan Interest Rates in India (2025 Update)
Interest rates for mortgage loans vary depending on the lender and the borrower’s financial profile.
| Lender | Home Loan Interest Rate | LAP Interest Rate |
|---|---|---|
| SBI | 8.45% – 9.50% | 9.90% – 11.50% |
| HDFC Bank | 8.50% – 9.40% | 10.00% – 11.75% |
| ICICI Bank | 8.75% – 9.65% | 10.25% – 12.00% |
| Axis Bank | 8.60% – 9.55% | 10.50% – 12.50% |
Factors Affecting Mortgage Loan Interest Rates:
✅ RBI’s Repo Rate (affects floating interest rates)
✅ Applicant’s credit score
✅ Type of employment (salaried/self-employed)
✅ Loan tenure (shorter loans may have lower interest rates)
Pros and Cons of Mortgage Loans
✅ Pros:
✔️ Helps in buying property without paying the full amount upfront
✔️ Long repayment tenure (up to 30 years) reduces monthly EMI burden
✔️ Tax benefits on principal and interest payments (Under Section 80C & 24(b))
✔️ Lower interest rates compared to unsecured loans
❌ Cons:
⚠️ Defaulting on the loan can lead to property loss
⚠️ Interest payments over long tenure can be costly
⚠️ Processing fees and additional charges increase loan cost
How to Get the Best Mortgage Loan in India?
💡 Follow these tips to secure the best mortgage loan deal:
1️⃣ Compare Interest Rates – Check loan rates across different banks and NBFCs.
2️⃣ Check Loan Eligibility – Use online mortgage loan calculators to estimate loan eligibility.
3️⃣ Improve Your Credit Score – A score above 750 gets you the lowest interest rates.
4️⃣ Opt for Shorter Loan Tenure – Shorter tenure reduces overall interest cost.
5️⃣ Negotiate Processing Fees – Some lenders offer discounts on processing fees.
6️⃣ Choose Between Fixed & Floating Rates – Fixed rates offer stability, while floating rates can be lower over time.
Mortgage Loan vs. Loan Against Property: Which is Better?
Many borrowers confuse mortgage loans with loan against property (LAP). Here’s how they differ:
| Feature | Mortgage Loan | Loan Against Property |
|---|---|---|
| Purpose | To buy/build a house | Any personal/business use |
| Interest Rate | Lower (8.5%-9.5%) | Higher (10%-12%) |
| Loan Amount | 75%-90% of property value | 50%-70% of property value |
| Tax Benefits | Available under 80C & 24(b) | No tax benefits |
| Repayment Tenure | Up to 30 years | Up to 15 years |
Verdict: If buying a home, a mortgage loan is the better option. If you need funds for business or personal needs, LAP can be useful.
Conclusion
A mortgage loan is a powerful financial tool that helps individuals achieve homeownership with manageable EMIs. However, it’s crucial to compare lenders, understand eligibility requirements, and optimize loan terms to get the best deal.
By following the tips mentioned in this guide, you can make an informed decision and enjoy a smooth home financing experience.
💬 Got questions about mortgage loans? Drop them in the comments below!
Check our Article on How to Improve CIBIL Score for Better Loan Eligibility