3 Major Benefits of Mortgage Loans

In certain instances, there arise urgent financial needs that require immediate attention. During such times, being a homeowner can be advantageous, as you have the option to mortgage your property in exchange for the necessary funds. However, not a lot of people are aware of the many benefits that a mortgage loan can offer to make things a lot more manageable for you while also offering significant financial aid. So, to make a wise decision, one must know all the essential details about a mortgage loan. Today, we get to know more about this type of home loan and understand the various advantages it offers. 

What is a Mortgage Loan?

A mortgage loan is a type of home loan that is secured by utilising your asset, such as residential or commercial property, as collateral. It allows borrowers to repay the amount in monthly payments, which can make it quite manageable for them. Moreover, lenders usually prefer properties that are easily accessible and have clear ownership titles in favour of the borrower. Also, a mortgage loan may have a payback duration of up to 20 years.

Regarding the utilisation of funds, lenders typically do not impose specific restrictions on how the mortgage loan proceeds should be spent. As a result, borrowers opt for these loans to fulfil various financial requirements such as home renovations, business expansions, medical emergencies, funding their children's higher education, and more.

Advantages of a Mortgage Loan

Mortgage loans offer numerous advantages that make them highly favoured among borrowers. Here are some key benefits of mortgage loans:

1. Property Ownership

When you obtain a mortgage loan, you retain full legal ownership of the property you pledge as collateral. This allows you to continue enjoying the benefits of property ownership while accessing the funds you need.

2. Quick Approval

As a secured loan, mortgage loans typically undergo a faster approval process compared to other types of loans. The collateral provided reduces the risk for lenders, enabling quicker loan processing and disbursal.

3. Lower Interest Rates

Mortgage loans generally come with lower interest rates compared to personal loans. This results in reduced borrowing costs and more affordable monthly payments, ultimately saving you money over the loan tenure.

Such benefits of mortgage loans make them an attractive option for borrowers, providing the opportunity to unlock the financial value of their property while enjoying favourable terms and conditions.

Types Of Interest Rates for Mortgage Loans

There are two types of interest rate options that one can choose from. Let us have a look at both the two options to help you make a prudent decision:

1. Fixed interest rate

As the name implies, this interest rate in this option remains constant throughout the tenure of the loan. This option is typically offered to candidates who have a mortgage loan with a shorter term. As a result, if you want a longer-term mortgage loan, this may not be an option for you. 

2. Floating interest rate

This interest rate in this option is modified based on market rates. While you cannot foresee the exact rate of interest, you may learn about the current rate by visiting the lender's website. This interest rate fluctuates on a regular basis and is directly related to the Marginal Cost of Funds based Lending Rate (MCLR).

By considering these two types of interest rates, you can select the option that goes well with your preferences and financial circumstances while opting for this type of home loan.

Conclusion 

The advantages and benefits of a mortgage loan are numerous, making it a popular choice among borrowers. By leveraging the value of your property, you can secure funds for various purposes while retaining ownership of the property.