The short answer
A loan against property (LAP), also called a mortgage loan, is a secured loan against a residential or commercial property you already own. You can use the money for business, education, a wedding, medical costs, consolidating expensive debt or buying another property, as long as the purpose is lawful and the lender's policy allows it. Some uses, such as speculation, are typically barred.
Lenders usually lend a smaller share of the property's value than on a home loan, commonly somewhere around half to two-thirds of the market value for residential property and less for commercial property, as a matter of their own policy. Tenures are often up to 15 years. Rates are usually higher than home loan rates and lower than personal loan rates.
The property is the security. If you cannot pay, the lender can take possession and sell it under the SARFAESI Act without going to court, after giving notice. Borrow only what you can repay from income you can count on, and keep the purpose clear for tax.
How LAP differs from a home loan
A home loan is for buying, building or improving a house, and its loan-to-value limits are set by the Reserve Bank's housing finance rules. LAP is for other purposes, against a property you already own, and the share the lender advances is set by the lender's credit policy within the RBI's general rules on secured lending.
Because the purpose is broader and the lender cannot see how the money is used as easily, LAP is generally priced higher than a home loan. Floating-rate LAP from a bank is linked to an external benchmark under the 2019 rules if it is a retail loan to an individual; LAP for a business may be linked differently. Check what the sanction letter says.
Prepayment: under the Reserve Bank's 2025 prepayment directions, a floating-rate loan to an individual for a non-business purpose carries no prepayment charge for loans sanctioned or renewed from 1 January 2026. A LAP taken for business purposes can carry a charge, subject to the directions' separate rules for micro and small enterprises. Read the Key Facts Statement for the exact position.
What lenders check
The property: clear title in your name, all approvals, no existing mortgage (or the existing lender's consent to a second charge, which is unusual), and for flats, the society's NOC. The lender's advocate and valuer do the same legal and technical checks as for a home loan, described in our eligibility guide.
You: income and repayment capacity, assessed with FOIR as for a home loan, your credit history, and, for business borrowers, the business's financial statements and bank statements.
Co-owners: every co-owner of the property must join the mortgage, usually as a co-borrower or guarantor. If a parent's or spouse's name is on the deed, they will be signing too.
The value: the lender's valuation, not the price you have in mind. Older properties, those in unapproved buildings, and those with limited resale demand may get a low valuation or none.
Worked example: what a LAP costs
Illustrative; assume a 10 per cent interest rate and that the lender's policy allows 60 per cent of value. You own a flat valued at ₹1 crore, free of any loan. The lender offers 60 per cent: ₹60 lakh.
Over 15 years at an assumed 10 per cent, the EMI is about ₹64,476. Total repayment is about ₹1.16 crore, of which about ₹56 lakh is interest. Add a processing fee (assume 1 per cent plus GST: ₹70,800) and legal, valuation and mortgage stamp duty (assume ₹30,000).
If you need only ₹20 lakh, borrow ₹20 lakh. Over 10 years at the same assumed rate, the EMI is about ₹26,430. Borrowing the maximum because it is available is the most common LAP mistake; you pay interest on money you did not need, with your home as security.
Common uses, and better alternatives
Business working capital or expansion: LAP is common for small businesses because it is cheaper than unsecured business loans. But a business downturn then puts the family home at risk. A business loan secured by business assets keeps the home out of it.
Consolidating expensive debt: replacing credit card debt or personal loans with a lower-rate LAP can cut interest substantially, but only if you stop building the old debt back up.
Education or medical costs: an education loan may be cheaper and, under the old tax regime, its interest has its own deduction; check before choosing LAP.
Buying another home: if the money is for buying or building a house, a home loan on the new property is usually cheaper and comes with housing-specific protections. A home loan top-up on your existing home loan is another option; see our balance transfer and top-up guide.
Tax, in general terms
There is no tax deduction for a LAP as such. What matters is what the money is used for.
If the money is used to buy, construct, repair or renovate a residential house, interest may qualify for the house-property interest deduction under section 22 of the Income-tax Act, 2025 (formerly section 24(b) of the 1961 Act), within that section's limits and conditions, and under the old regime for a self-occupied home. Principal repayment of a LAP does not qualify for the principal deduction under section 123 (formerly 80C), because that deduction is for loans taken to buy or build a house from specified lenders on the terms the section sets.
If the money is used in a business or profession, the interest may be a business expense against business income. If it is used for personal consumption, there is no deduction. Keep a clear trail of where the money went, and take advice from a tax adviser; our home loan tax benefits guide explains the house-property rules.
The risks
Your property is at stake. Under the SARFAESI Act, 2002, a bank or eligible lender can, after classifying the loan as a non-performing asset and giving a 60-day demand notice, take possession of the secured property and sell it, without first going to court. Our bank auction guide explains how such sales work from the buyer's side; the same process applies to a defaulting borrower's property.
Over-borrowing: the large amounts available against property can tempt borrowers to fund spending that does not generate income to repay it.
Long tenure, high interest: a 15-year LAP at a higher rate than a home loan costs a lot in total interest. Prepay when you can.
Family consent: co-owners must sign, and family members who live in the property may not fully understand the risk. Explain it before they sign.
Selling later: a mortgaged property cannot be sold with a clean title until the loan is closed or the buyer's lender pays it off. Plan the sequence if you might sell.
Before you sign
Get the Key Facts Statement and compare the annual percentage rate (APR), which includes fees, not just the interest rate.
Check the benchmark, reset frequency and prepayment terms, and whether the loan is classed as business or personal.
Confirm which original documents the lender will hold and that they will be returned within 30 days of closure (see our sanction-to-disbursement guide for the RBI rule).
Do not sign blank documents or undated cheques beyond what the sanction letter lists.
LAP on commercial or rented property
Lenders also lend against shops, offices and other commercial property, usually at a lower share of value than residential property, because commercial property is harder to value and sell. The legal and technical checks are similar, with extra attention to the property's approved use and any tenancy.
If the property is let to a good tenant on a long lease, some lenders offer lease rental discounting: a loan repaid directly from the rent, which the tenant pays into an account the lender controls. The loan size depends on the rent and the remaining lease term rather than only on the property value. It is a business product with business-loan terms; read the prepayment and default clauses carefully, and remember that if the tenant leaves, the EMI falls on you.
A property that is already let can still be mortgaged under an ordinary LAP, but the lender will want to see the lease, and a buyer at a forced sale takes the property subject to a valid lease, which can lower what it fetches.
Worked comparison: LAP vs a personal loan
Illustrative; assume 10 per cent for the LAP and 13 per cent for an unsecured personal loan, both over five years. On ₹10 lakh, the LAP EMI is about ₹21,247 and total interest about ₹2.75 lakh. The personal loan EMI is about ₹22,753 and total interest about ₹3.65 lakh. The LAP saves about ₹90,000 of interest.
Against that saving, set the LAP's costs and risks: a processing fee, legal and valuation charges and mortgage stamp duty, which on a ₹10 lakh loan can take a meaningful part of the interest saved; a longer approval process; and your property as security. For smaller amounts and short periods, the gap can be narrower than it looks, so compare the APR in each Key Facts Statement rather than the headline rates.
Common mistakes
Borrowing the maximum on offer rather than what you need.
Using a LAP to buy a home when a home loan would be cheaper.
Assuming LAP interest is tax-deductible regardless of use.
Putting the family home at risk for a business venture without a fall-back plan.
Comparing only interest rates and ignoring processing fees and other charges.
Not reading the prepayment terms for a business-purpose LAP.
Common questions
How much loan can I get against my property?
It depends on the lender's policy and valuation. Lenders commonly lend somewhere around half to two-thirds of the market value of a residential property, and less for commercial property. Your income must also support the EMI.
Is a loan against property cheaper than a home loan?
Usually not. LAP rates are generally higher than home loan rates and lower than personal loan rates. Compare the APR in each lender's Key Facts Statement.
Can I claim tax benefits on a loan against property?
Only depending on use. Interest on money used to buy, build or repair a house may qualify for the house-property interest deduction; interest on money used in a business may be a business expense. There is no principal deduction. Take tax advice.
What happens if I cannot repay a loan against property?
After the loan becomes a non-performing asset, the lender can issue a 60-day notice under the SARFAESI Act and then take possession of and sell the property to recover its dues.
Can I get a LAP on a property owned jointly with my parents?
Usually yes, but every co-owner must join the loan as a co-borrower or guarantor and sign the mortgage.
Is there a foreclosure charge on a loan against property?
Not on a floating-rate LAP to an individual for a non-business purpose under RBI's 2025 directions, for loans sanctioned or renewed from 1 January 2026. Business-purpose and fixed-rate loans may carry a charge, which must be disclosed upfront.
What is lease rental discounting?
A loan against a let commercial property, sized on the rent and the remaining lease term, and repaid from the rent, which the tenant pays into an account the lender controls. It is a business product with business-loan terms.
Sources
- Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, issued 2 July 2025, effective 1 January 2026 (rbi.org.in); checked 2 October 2026
- Reserve Bank of India, circular of 4 September 2019 on external benchmark based lending (rbi.org.in); checked 2 October 2026
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, section 13 (indiacode.nic.in); checked 2 October 2026
- Income-tax Act, 2025, sections 22 and 123 (formerly sections 24(b) and 80C of the 1961 Act), in force from 1 April 2026; checked 2 October 2026
- LTV and tenure ranges: lender product pages for loans against property (for example SBI, HDFC Bank, ICICI Bank, Bajaj Housing Finance); lender policies, not RBI rules; checked 2 October 2026
- EMI figures computed with the standard reducing-balance formula at an assumed 10 per cent; not a quote
Last checked 2026-10-02.