Should I sell my house or take an LAP?

Posted by Shaheen Shaikh on May 6th, 2018

A loan against property salvages your home from being sold, and helps you leverage its value to make a dream come true. This article takes a look at how taking a loan against property is a better idea than selling the house.

There comes a time in your life when you require an urgent fund of money. You wonder how you can raise money at short notice – then you hit upon the idea of selling a property that you own. But there is a better solution than selling the house – it is known as a ‘loan against property’.

Why take a loan against property?

Also known as a ‘mortgage loan’, the loan against property is a way to leverage the current value of your owned property to get access to a large fund of money for an urgent need. The need could be personal or professional – you might want to enrol your child in a foreign university, or you may be on the brink of starting a business. You might even wish to buy a small home for yourself and your spouse.

If you were to sell an owned property to raise the necessary funds, you would –

• Wait an indefinite amount of time to find a buyer and finish the sale
• Lose all ownership rights to the property once sold
• Get access to a large fund of money, but at the cost of losing your owned property forever

As opposed to making an outright sale, a loan against property helps you retain all ownership even after you take the loan. The bank is merely the lender in this case, and does not assume partial or full ownership over the house at any point. Also, you get a fair deal on the house’s value when you deal with a reliable bank.

The mortgage loan rates are normally higher than home purchase loan rates. However, leading banks in India offer competitive rates of interest, as also a choice of at least four different mortgage loans as per your requirement. Furthermore, there is minimal paperwork and quick processing time.

Should you take this loan?

The loan against property helps you monetise your owned property without losing ownership in any way.

When taking this kind of loan, you must be sure about your repayment potential. It is not advisable to take this loan if you are contemplating quitting your job or taking an unpaid leave from work. You should also not consider it if you already have other liabilities to contend with – credit card/vehicle loans, for example. Some banks might be amenable to giving you this loan if you are still servicing a home purchase loan on the same property, but most banks will refuse your mortgage loan request in this case.

Do ensure that you have a good credit score and that you have repaid your othe r debts before opting for the loan against property.