Mortgage Not To Be Dreaded

Half a century ago , the word loan was dreaded . It meant selling yourself to the lender. For rural –folks it almost amounted to degradation at the hands of the village mahajan and till the time it was repaid it hung like an albatross round the neck. It's a different scenario today, with financial institutions chasing loan seekers.

The going has never been so good for the one's who have vowed to live their lives on loan. With government regulations and legislation, offering loans is no risky business and recovery has been made easy with collateral securities and guarantees.

Procuring loan against property is easier than baking pizzas at home. The easy availability of loans has led to the growth of home loan industry at 30 to 35 %. The total loan disbursement was 75000 crores last financial year up from 57000 in 2004-5, And the pace is expected to be maintained this year too. The National Housing Bank (NHB) aims to catalyse Rs. 75000 institutional housing credits by 2009.

Banks provide loan against mortgage of property on an attractive rate of interest i.e. mortgage loans. Businessmen, self employed professionals, salaried customers are all eligible to apply for the loan like equity loans, mortgage loans, etc. It enables the borrower to apply for loan against a fixed asset.

The maximum amount of loan depends on a number of factors, like customer's profile, his financial standing and repayment capacity, tenure of the loan. The repayment tenure increases or decreases with the amount of loan. Repayment is done through Equated Monthly Installments or EMI. Interest can be paid either on fixed or floating basis like adjustable rate mortgages. Banks charge prime lending rate as their interest. Interest rate can be discounted for existing clients or in special cases according to the policies of the bank.

The Mortgage financing industry was estimated approximately at US $ 18 billion in India. The mortgage industry is undergoing a change as the market is dominated by banks in the direct housing finance sector. Though the housing finance industry in India is growing for the past few years still financing through the organized sector continues to account only for 25% of the total housing investment in India.

The NHB however is trying to rationalize mortgage of finance .Rural housing according to NHB would constitute 60 % of the Banks loan portfolio. The Bank also plans to launch a reverse mortgage scheme for senior citizens. In fact the draft concept has been presented to Reserve Bank of India. And senior citizens can access this scheme within the next 3 months.