Loan against property + EMI.
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Your breakdown
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What a loan against property really is
A loan against property, or LAP, lets you pledge a residential or commercial property you already own and borrow against its market value, while you keep using or living in it. Lenders call it a secured, mortgage-backed loan, and because the bank holds your title deeds as security, the interest rate sits well below a personal loan. The trade-off is that LAP rates are higher than a home loan, because the money is not being used to buy a house the bank can resell as the original asset. This calculator estimates the maximum loan from your property value and loan-to-value ratio, then computes the EMI and the total interest over the tenure.
Loan-to-value, the number that caps your borrowing
Banks rarely lend the full value of the property. The loan-to-value ratio, or LTV, is typically 60 to 70% for residential property and lower, often 50 to 60%, for commercial or industrial property. The lender’s own valuer, not your broker, decides the market value, and they tend to be conservative. So a property you believe is worth 1.5 crore might be valued at 1.4 crore, and 65% of that is what you actually get. Interest rates for LAP currently run roughly 9 to 12% depending on the lender, your income profile, and whether you are salaried or self-employed, with tenures stretching up to 15 years.
Borrowing against a 1.5 crore property
Take a property valued at 1.5 crore, a 65% LTV, a rate of 10.5%, and a 12-year tenure. The eligible loan is 97.5 lakh, and the EMI works out using the standard reducing-balance formula.
You borrow 97.5 lakh but repay roughly 1.72 crore in total, of which 74.37 lakh is pure interest. The split below is sobering.
The tax angle most borrowers get wrong
LAP interest is not automatically deductible the way a home loan is. There is no Section 24(b) or 80C benefit just because the loan is secured by a house. The deduction depends entirely on the end use of the money. If you use the LAP to fund a business, the interest is a business expense under Section 36 or 37. If you use it to buy or construct another residential house, the interest can qualify under Section 24(b) on that new property. But if you use it for a wedding, a holiday, or to consolidate consumer debt, the interest gives you zero tax benefit. Keep a clear paper trail of where the money went, because the assessing officer will ask.
LAP or a top-up home loan?
If you already have a running home loan on the same property and need funds, a top-up loan from the same lender is usually cheaper and faster than a fresh LAP, because the property is already mortgaged and valued. Compare the top-up rate against fresh LAP offers before committing. My rule of thumb: never pledge your only home for a discretionary expense. A secured loan means the bank can ultimately take the asset if you default, and a roof over your head is not worth risking for a depreciating purchase.
Will my rental income help eligibility?
Yes. Many lenders allow LAP against a let-out property and will factor the rent into your repayment capacity, alongside salary or business income. They still apply a foreclosure-and-margin buffer, so do not assume the rent alone services the EMI. Floating-rate LAP also carries no prepayment penalty for individual borrowers under RBI norms, so you can repay early without a charge.