Mortgaging your property has its unique challenges, including its documentation. This guide provides an overview of the entire process, starting from the document required, the obstacles that may come in between, and ways to find solutions for bank requirements.

What is a Mortgage?

A mortgage is a pledge of a borrower’s property as collateral for a loan. The borrower remains in possession of the property, while the lender has the option to seize it if the borrower defaults. This process is widely used in consolidating debts or in-home buying situations. 

Different Types of Mortgage

In India, different types of mortgage loan tend to serve different financial needs. Here are some of the most common types:

• Home Loan (Housing Loan): When one is either buying, building, or renovating a home, and is offered at fixed or floating rates.
• Loan Against Property (LAP): A secured loan against a residential or commercial property, typically for personal or business use.
• Commercial Property: To purchase or construct a commercial property primarily directed towards businesspeople seeking office or rental space.
• Reverse Mortgage Loan: Offered to elderly citizens (60+ years), allowing conversion of home equity into monthly payments that are repaid when the property is disposed of or once the borrower passes away.
• Lease Rental Discounting (LRD): Against future rental income from commercial property, secured against the lease agreement.
• Second Mortgage Loan: The loan put against a property, even when a mortgage is already on the same property, to secure further funds, though at a higher risk to the lender. 

Registered vs. Equitable Mortgage Loans

In India, mortgages are divided into two kinds: registered and equitable, also known as  non-registered.

Registered Mortgage Loans

Under the registered mortgage, the agreement is registered at the local registrar by the lender. This formality makes the lender more secure in the possession of the property.

Key Benefits:

• Security for Lenders: This is preferred by banks as it provides easy loan recovery without the court’s involvement.
• Legal Authority: In case you fail to repay, lenders have the legal power to take over or auction your property to recover the outstanding dues.

Equitable Mortgage Loans

In this mortgage, there is no actual registration. Instead, you would hand over property documents to the lender. The bank then assesses these documents and the value of the property before they can approve a loan.

Key Benefits:

• Fast Process: The absence of the need for registration makes the loan speedier.
• Reduced Cost: Registration fees are absent, giving you an overall lesser cost.

Which Mortgage Should You Choose?

Registered mortgages are unarguably safer for lenders, which is why banks prefer them over others. You can check with your bank what conditions they have for registered or equitable mortgages.

Necessary Document Required for Mortgaging a Property

For securing a mortgage loan, the following eight documents are to be provided:

1. Proof of Ownership
   • Title deed: The basic document showing the ownership of land or property.
   • Land purchase documents: To be submitted if the land on which the property is constructed is purchased.
   • Allotment letter: Correspondence received for property allotted by a particular government authority.
2. Completion Certificate
   This is a certificate issued by the municipal authority, which states that the construction has been finished and conforms to the approved plans.
3. Occupation Certificate
   This certificate provides something called the occupancy certificate, which establishes the suitability of a certain property for occupation (and probably dwelling).
4. Building Approval Plan
   This contains the sanctioned building plan from municipal authorities, where it is certified that construction is allowed.
5. Tax Receipts
   Make sure that all property taxes are cleared; resuming them embroils a lot of trouble under the loan application.
6. Encumbrance Certificate
   An EC states that the property is free from all sorts of legal encumbrances like outstanding loans or disputes.
7. No Objection Certificate
   Required from housing societies or builders, if applicable, to ensure that they have no objections to the property being mortgaged.
8. Personal Documents
   In addition to property documents, banks require personal details, including KYC documents (Aadhaar, PAN, etc.), proof of income (salary slips, income tax returns, or bank statements), and passport-size photographs of the applicant and co-applicant.

Steps to Secure a Mortgage Loan

In five easy steps, you can secure your mortgage loan.

• Compile Documents: Collect documents. Consult legal professional help for other proofs in case the requirements are not complete.
• Seek Legal Experts: A real property attorney is necessary to finalize the documents, prepare affidavits, and settle gaps of ownership.
• Present Your Claim to the Bank: The collected documents should be presented to the bank along with the title of the property. Make sure to keep backup affidavits or legal opinions with you.
• Property Valuation: The bank will conduct an independent valuation of your property to assess its worth in the market. So be ready for this!
• Approve the Loan: Complete all extra requirements, finalise terms, and close the loan.

Common Challenges in Mortgage Property

Borrowers may face some challenges in the process of getting a mortgage loan. These include:

1. Absence of Sale Deed

   The construction of the property may not involve a traditional sale. In such cases, the applicant should utilise documents like a title deed, completion certificate, and affidavits explaining the ownership history to cover this requirement.

2. Absence of Municipal Approvals
   

   If a completion or occupancy certificate is unavailable, you could either regularise your property with the respective local municipal authority or obtain retrospective approvals if it is permitted.

3. Encumbrances or Legal Disputes
   

   Clear all dues that are pending regarding your property, and see to it that any disputes are settled. Get the updated encumbrance certificate to give the bank assurance about the legality of the property.

How Zolvit Can Help

At Zolvit, we work to simplify mortgage loan applications by ensuring expert help is offered through every stage:

• Documentation support: Helping you with documentation ranging from affidavits to municipal approvals.
• Legal representation: Conflict resolution over title issues, obtaining certificates such as EC, CC, and OC.
• Expert guidance: Advising on bank requirements and helping through each of the steps of the mortgage.

Conclusion

Obtaining a mortgage on property built by a family member can seem intimidating, but with documentation, legal assistance, and bank knowledge, it could turn into a straightforward process. Through preparation and legal help, you can solve challenges and acquire your loan. Contact Zolvit today to secure your mortgage loan stress-free.

FAQs Related to Mortgaging Property