Understand the Mortgage Loan Meaning, Process & Its Types

mortgage loan meaning, what is mortgage loan, how to avail mortgage loan
Understand complete mortgage loan meaning

A mortgage loan, also known as a home loan, is a type of loan that allows individuals to purchase or construct a property by pledging it as collateral to the lender. The property acts as security for the loan, and the borrower repays the loan amount along with interest in fixed instalments over a predetermined period of time. Mortgage loans have become increasingly popular among individuals looking to fulfil their dream of owning a home. In this article, we will delve deeper into the meaning of mortgage loan, the process of obtaining one, eligibility criteria, and their significance in the realm of home ownership.

What is the Meaning of Mortgage:

A mortgage is a legal document that pledges a property as collateral for a loan. It is a type of security that is used to protect the lender in case the borrower defaults on the loan repayment. The borrower retains the equitable title to the property and has the right to use and occupy the property during the loan term.

Mortgage Loan Meaning: 

At its core, a mortgage loan meaning can be explain as a financial product that enables individuals to borrow a significant sum of money from a lender to purchase or construct a property against the value of a property they already own. The term “mortgage” refers to the legal agreement between the borrower and the lender, which outlines the terms and conditions of the loan, including the repayment schedule, interest rate, and other associated costs. The borrower holds legal ownership of the existing property, but the lender has a lien on the property until the loan is repaid in full. Once the loan is fully repaid, the lien is released, and the borrower becomes the sole owner of the property.

This also means that in case of default by the borrower, the lender has the right to foreclose on the property and sell it to recover the outstanding loan amount. Mortgage loans are typically long-term loans with tenures ranging from 5 to 20 years, depending on the borrower’s repayment capacity and the lender’s terms and conditions. Now that we are clear about “what is a mortgage loan”, let’s jump next to the process.

The Process of Mortgage Loan

The process of a mortgage loan involves several steps, which may vary slightly depending on the lender’s requirements. Here is a general overview of the typical process:


The borrower submits an application to the lender, providing all the necessary details about the existing property, the loan amount required, and their financial and personal information.


The lender verifies the borrower’s financial and personal information through various documents, such as income proof, bank statements, identity proof, and property-related documents.

Property Valuation:

The lender assesses the value of the existing property through a professional appraisal to determine the loan amount that can be sanctioned.

Loan Sanction:

Upon satisfactory verification of the borrower’s credentials and property valuation, the lender sanctions the loan amount, and the borrower receives a formal offer letter outlining the terms and conditions of the loan.

Acceptance and Execution:

The borrower reviews and accepts the loan offer, after which the loan agreement is executed, and the borrower provides the necessary documents, including post-dated cheques and property-related documents, as per the lender’s requirements.


The lender disburses the loan amount to the borrower’s account or in favour of the seller or builder, as per the agreed terms and conditions.


The borrower repays the loan amount along with interest in fixed instalments, commonly known as Equated Monthly Instalments (EMIs), over the tenure of the loan.

Mortgage loan eligibility

To be eligible for a mortgage loan, the borrower must meet certain requirements set by the lender. These requirements may include:

Good credit score:

The borrower’s credit score is an important factor in determining their mortgage loan eligibility. A higher credit score indicates a lower risk of default, making the borrower more attractive to lenders.

Stable income:

The borrower must have a stable source of income to show the ability to repay the loan. Lenders typically require borrowers to provide proof of income, such as pay stubs, tax returns, or bank statements.

Low debt-to-income ratio:

The borrower’s debt-to-income ratio (DTI) is the percentage of their monthly income that goes toward paying the debt. Lenders typically prefer borrowers with a DTI of 43% or lower.

Property value:

The property being used as collateral for the loan must meet the lender’s standards for value, condition, and location.

Down payment:

The borrower must make a down payment on the property, which is typically a percentage of the purchase price. Lenders in India are authorized to lend only up to 80% of the purchase price of a property, meaning that the borrower must pay the remaining 20% as a down payment.

To sum up the informative post on Mephimmy Media, a mortgage loan is a type of secured loan in which the borrower pledges their existing property as collateral to the lender. It is commonly used for the purchase of real estate or the construction of a new home. The process of obtaining a mortgage loan involves property evaluation, loan application, loan processing, loan approval, closing, and repayment. To be eligible for a mortgage loan, the borrower must meet certain requirements set by the lender, including a good credit score, stable income, low debt-to-income ratio, property value, and down payment.