What is Mortgage loan?

A mortgage is an agreement between you and your lender through which you borrow money to purchase a property, i.e. land or home. If you fail to repay the loan, the lender has the right to seize and sell the property to recover the loan amount. The lender pays you a lump sum to purchase the property at the beginning, and you repay it through fixed monthly instalments for a specified period. The monthly payments include principal and interest components.

Benefits of Mortgage Loans

• Buy property without upfront payment: Mortgage Loans allow you to buy property without paying the full price.
• Lower interest rates: Mortgage Loans generally have lower interest rates than Personal Loans or Unsecured Loans. They are low-risk for lenders because they are secured by property.
• Improve credit score: If you pay your loan installments on time, your credit score will gradually improve. This can help you get loans and Credit Cards at better terms in the future.
• Flexible repayment: You can choose a repayment period that suits your financial situation. However, your credit score, income, and loan amount can impact this.
  You can get an Axis Bank Home Loan for up to 30 years depending on your eligibility. Get a loan of up to ₹ 5 crore and enjoy many benefits like easy application process and doorstep service.
• Tax benefits: The principal repayments of Housing Loans are eligible for a deduction of up to ₹1,50,000 under Section 80C of the Income Tax Act. The interest payments are also deductible up to ₹2 lakh. Loans taken for buying land are not eligible for tax deductions.

How does credit score impact mortgage?

Along with factors like income and employment stability, your credit score is used as a yardstick for measuring your creditworthiness. You can qualify for lower interest rates and better loan terms if you have a higher credit score (generally 750 or more).

Conclusion

A mortgage is a credit option that allows you to own a property without paying its hefty price upfront. It is also beneficial for the lender because the property secures the loan. Once you understand what is a Mortgage Loan and how it works, you can plan your finances to get favourable terms. For example, you can demonstrate a stable income, employment stability, and a high credit score in your application to get a mortgage at better terms.

Also Read: Home Loan vs Mortgage Loan: Exploring the differences

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.