A mortgage loan is one of the most common ways people finance the purchase of property. Whether you’re buying your first home or investing in real estate, a mortgage loan can help make that big financial step more manageable. In this article, we will explain how mortgage loans work, what factors to consider, and how to compare offers effectively. Our goal is to provide a clear, simple guide to help you make smart decisions when dealing with mortgage loans.
What is a Mortgage Loan?
A mortgage loan is a type of secured loan where the borrower uses real estate as collateral. In simple words, if you are taking a loan to buy a house, that house acts as security for the bank or lending institution. If the borrower fails to repay, the lender can take possession of the property.
How Do Mortgage Loans Work?
When a person applies for a mortgage loan, the lender evaluates their credit history, income, and ability to repay the loan. If approved, the loan is disbursed, and the borrower agrees to repay it through monthly installments over a period that can range from 10 to 30 years.
The monthly payment typically includes:
- Principal: The actual loan amount
- Interest: Cost of borrowing
- Taxes and Insurance: Property-related costs
Key Features of a Mortgage Loan
| Feature | Description |
|---|---|
| Loan Tenure | Typically 10 to 30 years |
| Interest Rate Types | Fixed, Floating, or Hybrid |
| Collateral | Property being purchased |
| EMI Payment Mode | Monthly |
| Prepayment Option | Available with or without charges |
| Processing Fee | Usually 0.25% to 1% of the loan amount |
Types of Mortgage Loans
There are several types of mortgage loans available to cater to different needs:
- Fixed-Rate Mortgage: The interest rate remains the same throughout the tenure.
- Floating-Rate Mortgage: The interest rate fluctuates based on market conditions.
- Hybrid Mortgage: Combines fixed and floating features.
- Interest-Only Mortgage: Only interest is paid initially, followed by principal repayment.
- Reverse Mortgage: Suitable for senior citizens to convert home equity into cash.
Current Mortgage Loan Interest Rates – 2025
Here’s a comparison of average mortgage loan interest rates offered by leading banks and financial institutions in 2025:
| Bank | Floating Rate | Fixed Rate | Women/Favored Concession | Loan Amount & Tenure |
|---|---|---|---|---|
| SBI | 7.50% – 8.45% p.a. | — | 0.05% for women | Up to 30 years |
| Union Bank | 7.45% – 10.00% p.a. | 11.40% – 12.65% p.a. | 0.05% on women; +0.10% on green homes | Up to 30 years; LTV ≤ 90% |
| Axis Bank | REPO + 2.85–3.60% → ~8.35% – 9.10% p.a. | Fixed 14.00% p.a. | Nil specified | Standard up to ₹10 crore |
| ICICI Bank | 8.75% – 9.65% p.a. (varies by credit score & loan size) | Fixed: 8.65–10.90% p.a. | No special women offer noted | Up to ₹5 crore |
| HDFC Bank | 8.45% p.a. onwards | — | 0.10% green project concession; 0.05% insurance smart discount | Standard tenure up to 30 yrs |
✅ Key Takeaways
- Lowest Floating Rates:
- SBI at 7.50–8.45% and Union Bank starting at 7.45% offer the most competitive floating options.
- Axis Bank’s floating rate ranges from ~8.35%, making it mid-tier.
- Fixed Rate Stability:
- Axis Bank offers the highest fixed rate at 14%.
- ICICI provides a range from 8.65% to 10.90%, lower than Axis for fixed options.
- Women Borrower Benefits:
- SBI and Union Bank offer a 0.05% interest concession for women applicants.
- Union Bank also provides an additional 0.10% cut for green home projects.
- HDFC supports green and insurance-linked discounts (0.10% and 0.05%).
- Loan Amounts & Tenure:
- SBI and Union Bank allow loans up to 30 years with LTV up to 90%.
- Axis can finance up to ₹10 crore, while ICICI supports loans up to ₹5 crore.
🧭 How to Use This Table
- For lowest floating EMIs: Choose SBI or Union Bank, especially if you’re a female borrower or opting for green projects.
- For rate predictability: ICICI’s fixed plans at lower rates may be appealing, particularly for shorter tenures.
- For large loan needs: Consider Axis Bank (₹10 crore) or ICICI (₹5 crore) if you’re financing high-value properties.
- For environment-friendly borrowers: Union Bank and HDFC offer meaningful green concessions.
Note: These are average indicative rates and may vary based on borrower profile.
EMI Calculator
Factors That Affect Mortgage Loan Interest Rates
Several key factors impact the interest rates you may be offered:
- Credit Score: A high score can lead to better rates.
- Loan Amount: Higher loan amounts may attract lower rates.
- Income Stability: Regular income ensures reliability.
- Property Type and Location: Urban properties often have lower risks.
- Loan Tenure: Shorter tenure usually means lower interest.
Eligibility Criteria for Mortgage Loans
| Criteria | Requirement |
|---|---|
| Age | 21 to 65 years |
| Income | Minimum ₹25,000 per month |
| Employment Type | Salaried or self-employed |
| Credit Score | Ideally 700 and above |
| Property Documents | Clear ownership title and valuation |
Documents Required
To apply for a mortgage loan, you will generally need:
- Identity proof (Aadhaar, PAN, etc.)
- Address proof
- Income documents (salary slips, bank statements)
- Property documents
- Employment proof (for salaried) or business proof (for self-employed)
How to Apply for a Mortgage Loan
Here’s a step-by-step process to apply:
- Check Eligibility: Use online tools or visit a bank.
- Compare Offers: Look at interest rates, fees, and terms.
- Apply Online or Offline: Submit application and documents.
- Verification: Bank reviews documents and property.
- Loan Sanction: Once approved, sanction letter is issued.
- Disbursement: Funds are released either in part or full.
Tips for Getting a Better Mortgage Loan Deal
- Maintain a good credit score
- Make a larger down payment
- Choose a shorter tenure if possible
- Negotiate processing fees
- Opt for balance transfer if better rates are available
Pros and Cons of a Mortgage Loan
| Pros | Cons |
|---|---|
| Helps in owning property | Long repayment period |
| Lower interest compared to unsecured loans | Risk of losing property on default |
| Tax benefits under 80C and 24B | Prepayment penalties may apply |
Tax Benefits on Mortgage Loans
You can avail the following tax deductions:
- Section 80C: Up to ₹1.5 lakh on principal repayment.
- Section 24B: Up to ₹2 lakh on interest paid.
These benefits are available only if the property is self-occupied.
Mortgage Loan: Top Frequently Asked Questions
Understanding mortgage loans is key for anyone looking to secure funds against their property. This section addresses common queries to provide clarity on this financial instrument.
A. A mortgage loan (also known as a Loan Against Property or LAP) is a type of secured loan where a borrower pledges an immovable property (like a house, flat, or commercial property) as collateral to the lender. The loan amount is sanctioned based on the market value of the property.
A. A home loan is specifically for purchasing or constructing a new property. A mortgage loan (Loan Against Property) is taken by pledging an existing property to raise funds for various personal or business needs, such as business expansion, education, medical emergencies, or marriage expenses.
A. Typically, residential properties (self-occupied or rented), commercial properties, and sometimes even plots of land can be mortgaged to avail a loan. The type of property can influence the loan amount and terms.
A. The loan amount for a mortgage loan is determined by the Loan-to-Value (LTV) ratio, which is the percentage of the property’s market value that the bank is willing to lend. This usually ranges from 50% to 75% of the property’s value, depending on the lender and property type.
A. Mortgage loan interest rates vary by lender and are influenced by factors like your credit score, income, the property’s value, and the loan amount. Rates are generally higher than home loan rates but lower than unsecured personal loan rates, typically ranging from 9% to 15% per annum.
A. Yes, a strong CIBIL (credit) score (generally 700 or above) is crucial. It indicates your creditworthiness and repayment capacity, which can help you secure a lower interest rate and a smoother approval process.
A. Mortgage loan tenures can vary, typically ranging from 10 to 15 years, and sometimes up to 20 years, depending on the lender and the borrower’s profile. A longer tenure means lower EMIs but higher overall interest paid.
A. Generally, mortgage loans taken for personal purposes do not offer tax benefits. However, if the loan against property is utilized for business purposes or for the acquisition/construction of a house (in specific scenarios), tax deductions on the interest paid might be applicable under certain sections of the Income Tax Act. It’s advisable to consult a tax advisor.
A. Common documents include identity proof, address proof, income proof (salary slips, ITR, bank statements), property documents (title deeds, approved plans), and bank statements. Specific requirements may vary by lender.
A. It depends on the lender’s policy and the outstanding amount of the existing loan. Some lenders may offer a “top-up” loan or a balance transfer facility, but the total loan against the property will still be subject to the LTV ratio.
A. Typical fees include processing fees (a percentage of the loan amount), legal and valuation charges, stamp duty, and sometimes foreclosure charges if you repay the loan early.
A. The approval and disbursement time can vary widely, typically ranging from 2 to 4 weeks, as it involves thorough property valuation and legal verification. It can be faster if all documents are in order and the property is easily verifiable.
Conclusion
A mortgage loan is a practical solution to own property without spending a large sum upfront. However, it is essential to understand the terms, compare lenders, and evaluate your repayment capacity before choosing the best mortgage loan offer. Always read the fine print, and don’t hesitate to negotiate with lenders. A little homework can save you a lot of money in the long run.
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