As a first-time borrower, you may wonder, what is a mortgage loan? Simply put, a mortgage loan is an instrument that requires you to pledge a self-owner property as collateral and in turn, it grants funding based on the asset’s current market value. As such, you can access quite a hefty sanction, so long as your financial and credit profile are in good standing.
Another unique factor is that the mortgage loan interest rates are much lower than several other unsecured options.
As a borrower, it also helps to know all you can about mortgage payments. Having in-depth knowledge about the factors that make up your monthly installments can help you take more informed decisions and extract more value from your undertaking. To get you started in the right direction and help you get acquainted with the main factors of a mortgage loan payment, take a look at these pointers.
Key Features are High-Value Loan, Longer Repayment Tenors, Competitive loan against property Interest Rate, Minimal Documents, Simple Eligibility Criteria which makes mortgage loan more secured option to take.
The principal is the loan amount sanctioned to you and it is a key part of your payment. With every EMI you pay, a portion of the outstanding principal gets repaid. Do note the EMIs you pay earlier in the tenor pay of a small portion of the outstanding principal. A common misconception is that a large portion of the early mortgage payments go toward the principal, when in fact, it is the opposite.
If you look at the amortisation schedule when you use a mortgage loan calculator, it is clearly shown that the interest payments are much higher than the principal. However, the percentage of the principal repaid steadily increases with each EMI repaid.
The interest component is directly related to the loan against property interest rates on offer. This is basically the cost of borrowing and the amount you pay as interest is based on the total principal outstanding. Additionally, it is important to note that the property loan interest rate has a hand in your total borrowing capacity. If the lender offers high mortgage loan interest rates, you might not qualify for the funding you need as the EMIs will be much higher.
For some secured offerings, the lender may levy a tax as part of the EMI payment. However, with a mortgage loan in India, you don’t have to pay any taxes on EMIs. Tax is only applicable on the processing charges or other administrative charges but not on EMIs. Additionally, in some countries, insurance premiums may also be billed as part of the mortgage payment. Speak to your lender about such payments to see how they will affect your total monthly outgo.
With a clearer idea of the elements that make up a mortgage payment, you are in a better position to take such financial decisions. Besides these factors about mortgage payments, it helps to know the different ways you can pay your EMIs and the consequences of missing payments. For insight on these topics, read on.
A mortgage is a loan from a bank or NBFC to help you finance the home purchase . While taking a mortgage loan one must make a promise that it will act as a security or collateral. Taking Mortgage loan as one can use it in the emergency.
How can you make mortgage payments?
Thanks to fintech advancements and the easy availability of digital provisions, lenders now allow you to make mortgage payments in a variety of ways. Gone are the days where you’d have to make a physical visit to the branch to deposit a cheque and make your payment. Today, you can take advantage of internet banking and pay your EMIs online. Most lenders will require you to authorise an ECS mandate, which is where the EMI amount gets auto-debited from your account on the set date.
This is the simplest method and all it requires is that you have enough balance to make the payment. The other payment options include NEFT or direct bank transfers, which are also quite quick but require you to manually carry out the payment online. Some lenders also allow you to pay online via debit or credit cards, mobile wallets, or through specialized customer apps.
What happens if you miss a mortgage payment?
Defaulting on any credit payment has its consequences and, in this case, they will cost you heavily. If you miss a mortgage payment, you are likely to include a penalty, which is an additional amount levied against the unpaid amount. In some cases, a lender may extend a grace period after the EMIs due date, allowing you to make the payment without any penalty. However, this is something you must discuss beforehand. In addition to the penalty, missing a payment has a negative effect on your credit score. When you miss a payment, your score decreases, and this lapse is recorded in your credit history.
A key part of being a smart borrower is that you are informed about the crucial aspects of your undertakings. Being aware of these factors also helps ensure that you don’t get misled. Without this knowledge, you won’t know to spot a discrepancy in your payment structure, and you could likely lose a lot of money if one exists and goes unnoticed. So, keep this mind, and opt for a mortgage in an informed manner.