Introduction
Mortgage loans have emerged as a key pillar of personal and business financing in India. These loans allow individuals and businesses to unlock the value of their existing assets or finance property acquisitions through structured borrowing solutions. However, the Indian lending market is diverse, and understanding the Different Types of Mortgage Loans in India is crucial to making the right financial choice.
Whether you’re planning to buy your first home, expand your business, invest in commercial real estate, or secure your retirement, there is a mortgage loan suited to your needs. In this comprehensive guide, we will explore seven major types of mortgage loans, their features, eligibility criteria, benefits, and associated risks, along with expert guidance to help you navigate the borrowing landscape.
1. Home Loan
What is a Home Loan?
A Home Loan is the most common type of mortgage loan, offered to individuals who wish to purchase, construct, or renovate a residential property. Home loans are long-term loans secured by the property being financed.
Key Features:
- Interest Rate: Typically ranges between 8% and 10% p.a.
- Tenure: Up to 30 years
- Loan-to-Value (LTV): Up to 90% of property value
- Tax Benefits: Available under Section 80C and Section 24(b) of the Income Tax Act
Eligibility Criteria:
- Indian residents and NRIs
- Salaried or self-employed individuals with regular income
- Minimum credit score of 650 (preferably 700+)
Pros:
- Lower interest rates than unsecured loans
- Long repayment period for manageable EMIs
- Substantial tax benefits
Cons:
- Lengthy documentation and approval process
- Requires clear title property and legal compliance
🔗 SBI Home Loans and HDFC Home Loans offer competitive interest rates.
2. Loan Against Property (LAP)
What is a Loan Against Property?
Loan Against Property (LAP) is a secured loan where a borrower pledges a residential, commercial, or industrial property to avail funds. These funds can be used for any personal or business need, except for speculative purposes.
Key Features:
- Interest Rate: Between 8.5% and 12.5%
- Tenure: Up to 15–20 years
- Loan Amount: Up to 70% of the property’s market value
- Tax Benefits: Applicable if used for business under Section 37(1)
Eligibility Criteria:
- Individuals, professionals, or business owners with clear ownership of property
- Must have steady income
Pros:
- Higher loan amounts
- Lower EMIs due to long tenures
- Property remains in your ownership
Cons:
- Risk of losing the property if EMIs are not paid
- Longer processing time
🔗 Learn more at ICICI Bank LAP or CreditCares.
3. Reverse Mortgage Loan
What is a Reverse Mortgage?
A Reverse Mortgage Loan is designed for senior citizens who own a self-occupied residential property. It allows them to receive periodic payments or a lump sum from a lender while retaining ownership and occupancy rights.
Key Features:
- Interest Rate: Around 9%
- Tenure: Lifetime or up to 20 years
- Ownership: Remains with borrower during lifetime
- Repayment: Loan is repaid by selling the property after borrower’s demise
Eligibility Criteria:
- Age 60 years and above
- Ownership of residential property in urban/semi-urban areas
- No existing loan on the property
Pros:
- Financial independence in retirement
- No EMI or repayment during lifetime
- Tax-free periodic payments
Cons:
- Limited lender participation
- Property must be self-occupied and dispute-free
🔗 Refer to NHB Guidelines on Reverse Mortgage for policy details.
4. Commercial Property Loan
What is a Commercial Property Loan?
A Commercial Property Loan is a mortgage loan used to buy or refinance commercial properties such as office spaces, retail outlets, or warehouses. These are ideal for businesses or real estate investors.
Key Features:
- Interest Rate: Between 9% and 13%
- Tenure: 10–20 years
- Loan Amount: Based on the property’s market value and borrower profile
Eligibility:
- Business entities, professionals, and self-employed individuals
- Valid business income and documents
Pros:
- Enables investment in income-generating assets
- Higher capital access for business expansion
Cons:
- Higher processing and legal fees
- Risk of asset loss in default
🔗 Visit Axis Bank Business Loans for details.
5. Lease Rental Discounting (LRD)
What is LRD?
Lease Rental Discounting is a form of term loan provided against rental income received from leased commercial properties. The future rental cash flows act as collateral for the loan.
Key Features:
- Interest Rate: 8%–11%
- Tenure: 5–15 years
- Loan Amount: Based on net rental income and tenant profile
Eligibility:
- Property owner with a registered lease agreement
- Strong tenant and lease terms (usually MNCs preferred)
Pros:
- Monetizes stable rental income
- No need to sell or mortgage property title
Cons:
- Depends on tenant’s credibility and lease term
- Property must be registered and legally compliant
🔗 Explore Bajaj Finserv Lease Rental Discounting.
6. Second Mortgage Loan
What is a Second Mortgage?
A Second Mortgage Loan is availed by borrowers who already have an existing mortgage loan and want to leverage the remaining value of their property. It is subordinate to the original loan.
Key Features:
- Interest Rate: 11%–14%
- Tenure: 5–10 years
- LTV: Depends on residual property value
- Requires NOC from first lender
Eligibility:
- Active first mortgage loan in good standing
- Clean repayment record
Pros:
- Access to additional funds without new property
- Useful for urgent needs
Cons:
- Higher interest rates
- Increased risk of foreclosure
🔗 Use CreditCares to compare second mortgage lenders.
7. Builder/Project Finance
What is Builder Finance?
Builder or Project Finance is offered to real estate developers to fund construction or land acquisition for residential and commercial projects.
Key Features:
- Loan Amount: ₹10 Cr to ₹100 Cr+
- Interest Rate: 10%–14%
- Tenure: Project-based (up to 7 years)
- Security: Mortgage of land/project receivables
Eligibility:
- Registered real estate developers with RERA-compliant projects
- Valid title deeds and approvals
Pros:
- Large capital access for project execution
- Structured repayment based on project milestones
Cons:
- Heavy due diligence by lender
- Strict regulatory oversight
🔗 For compliance, visit RERA India.
Comparison Table of Mortgage Loans
| Type | Interest Rate | Tenure | Best For |
|---|---|---|---|
| Home Loan | 8%–10% | Up to 30 yrs | Residential property buyers |
| Loan Against Property | 8.5%–12.5% | Up to 20 yrs | Business & personal needs |
| Reverse Mortgage | ~9% | Lifetime | Senior citizens |
| Commercial Property Loan | 9%–13% | 10–20 yrs | Entrepreneurs/Investors |
| Lease Rental Discounting | 8%–11% | 5–15 yrs | Landlords with rental income |
| Second Mortgage | 11%–14% | 5–10 yrs | Existing borrowers |
| Builder/Project Finance | 10%–14% | Up to 7 yrs | Developers and construction firms |
Things to Consider Before Choosing a Mortgage Loan
- Purpose: Whether you’re buying a home, funding education, or expanding a business.
- Property Type: Residential or commercial, ownership, clear title.
- LTV Ratio: Higher LTVs mean less upfront payment but higher risk.
- Repayment Tenure: Longer tenure lowers EMIs but increases total interest.
- Credit Score: Affects eligibility and interest rate.
- Processing Time: NBFCs may offer faster disbursal than traditional banks.
- Tax Implications: Home loans provide the most benefits.
FAQs on Mortgage Loans in India
Q1. Can I take a mortgage loan on inherited property?
Yes, if the property title is clear and legally transferred in your name.
Q2. Are mortgage loans only available for salaried people?
No. Self-employed, professionals, and even NRIs can apply.
Q3. How is the property evaluated?
Lenders appoint independent property valuers to assess fair market value.
Q4. What happens if I default on my LAP?
The lender has the right to auction your property to recover dues.
Q5. Can I prepay my mortgage loan?
Yes. Most banks allow prepayment. Fixed-rate loans may attract a small charge.
Conclusion
There is no single “best” mortgage loan. The right option depends on your financial goals, repayment capacity, and the nature of the property. By understanding the Different Types of Mortgage Loans in India, you empower yourself to make a strategic and well-informed decision.
Always evaluate your long-term affordability, consult with professionals, and compare offers across banks and NBFCs. Partnering with a trusted advisor like CreditCares ensures you receive personalized, compliant, and fast assistance across all types of mortgage loans.
