Just imagine you need some funds for your new business but banks are not willing to fund the new innovative business model. You don’t have much savings to fall upon to fund your dream project. You can still get a loan by mortgaging your property for that loan. In banking parlance, it is referred to as Loan against Property (LAP).
You can get a Loan against Property (LAP) against your existing residential or commercial properties. However, the value of the loan you can avail of primarily depends upon the valuation of the property. Further, the bank and financial institutions need to have sufficient cushion towards decline/ erosion in the value of the property so mortgaged. This is where the concept of Loan-to-Value ratio comes in.