Can I Take a Loan Against a House I Have Given on Rent?

A cash crunch can arise anytime, and you may end up needing surplus funds for unforeseen circumstances. You may need immediate access to funds to take care of a medical emergency, pay for your child’s higher education, fund your child’s marriage, start a business or expand an existing business, or plan a vacation abroad. Whatever the case, taking a personal loan can prove to be a costly affair since the interest rates are quite high, and the loan amount can be lower.

But, if you own a property, then you can put it to work and avail the best possible loan to fulfill your requirements. The best part is that if you own a house that you have given on rent, you can apply for loan against property by clicking here and let the tenant pay the monthly EMIs.

Let’s discuss how you can take a loan against a house that you have given on rent.

Loan Features

If you have rented out a property to an individual or a family, it can come handy during an emergency situation. You can get a LAP against a house/apartment you have given on rent. The best part is that such a loan would be cheaper than other housing loans and personal loans. Most importantly, you don’t have to worry about the monthly payment because your tenant will pay the EMIs on your behalf. That is, the rent money you receive will be used to pay the EMIs.

Although numerous lenders and lending institutions provide a loan against property only if it is rented out to reputed companies, some lenders like PNB provide a loan against a house that has been rented out to families and individuals.

How much can you get?

The loan amount ranges from INR 50,000 to INR 5 crores or even more. Nevertheless, the loan amount will depend on the house’s actual value that you have put on rent. You will get 70-75% of the total value of your house as a loan amount. At the time of availing the loan, you can discuss the monthly installments with the lender. The loan against property interest rate will be lower. But it will depend on the loan tenure as well as the monthly installment.

However, you need to be wary of the prepayment charges. In case, if you prepay the entire loan amount before the tenure is over, the lender may charge you a prepayment penalty that ranges around 1-2% of the amount prepaid. So, you need to check this aspect with the lender at the time of availing the loan.

Documentation

There are two ways to get this loan. Firstly, you can ask the tenant to enter into a tripartite agreement with the lender and you, whereby the tenant agrees to pay the rent directly to the lender. This will be equated as the EMI. Or, you can pay the EMI after the tenant pays you the rent. In both cases, the lender will sign a separate loan agreement with you.

Discuss this aspect with your tenant before availing the loan.

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