Equity Mortgage

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Equity Mortgage is one of the most common type of mortgage loan offered by most of the financial institutions and commercial banks. This type of mortgage is the most popular mortgage in India. Equity mortgage is the mortgage where the customer borrows loan against a collateral security of the house property which is owned by the customer from any commercial bank or financial institution. The concept of collateral security of the house property against the mortgage loan terms this mortgage also as home equity mortgage loans. The home equity mortgage loans are provided against collateral security such as residential house or apartment, industrial property, urban commercial complex, possessed in the name of the receiver of the loan. The security such as rented house can be accepted if the same property is on a lease and the person should also have the authority to collect the rent under the power of attorney.

The home equity mortgage consists of two elements as the other type of mortgages, such as the principal, the loan amount that is borrowed against the mortgage of a property and the interest charged on the principal amount at fixed or fluctuating rate. The rate of interest charged for the home equity mortgage is either fixed, i.e. the interest rate remains the same throughout the tenure of the loan and is not influenced by the alterations in the financial market or fluctuating, i.e. the rate of interest does not remain the same throughout the term of the loan as it fluctuates with the changes in the financial market. The home equity mortgage is extensively used for the purpose of paying off medical bills, renovation of house property, college education, etc.

Home equity mortgage is of two types open end loans and closed end loans. The open end home equity mortgage is kind of a rotating credit loan which is also known as the home equity line of credit according to which the customer may borrow the money whenever it is suitable for him and the rate of interest is usually in the form of fluctuating rate. In case of the closed end home equity mortgage the borrower receives the full amount at once.

Home equity mortgage loan disbursement in the India:

  • The period (1999-2000) housing finance corporation disbursed loans worth ` 9812.03 crore and banks ` 9911.35 crore
  • The period (2000-2001) housing finance corporation disbursed loans worth ` 12637.85 crore and banks ` 9787.24 crore
  • The period (2001-2002) housing finance corporation disbursed loans worth ` 14614.44 crore and banks ` 14744.85 crore
  • The period (2002-2003) housing finance corporation disbursed loans worth ` 17832.17 crore and banks ` 33840.53 crore

Last Updated on 5/26/2011