Everyone gets a share of their father and grandfather’s property, but have you ever considered taking out a loan against it? Under the law of succession, one obtains the right to the property of his grandfather and father, but is there any legislation or method by which one can obtain a loan from a bank in lieu of the property of his father or grandfather?
Property lawyer Sunil Pandey says that if an ancestral property is entirely in the name of the grandfather, then even though the grandson will be a part of it, he cannot take a loan on this land himself. Only the person whose name the property is recorded has the right to take a loan against the property. It is evident that if the property is not partitioned, it will be registered only in the name of the grandfather, and the grandson does not get the right to take a loan from the bank on this property.
Even if there is a property in the name of the grandfather, there are other ways for getting loans. If the grandson wishes, he can get a bank loan against his ancestral property, which is still in the name of his grandfather or father. According to Rajeev Mishra, an expert in banking who oversees the lending department at HDFC Bank, there are three ways to obtain a loan against ancestral property that is not yet in the borrower’s name.
If a person wishes to take out a loan on a property named after his grandfather by making the property’s owner a guarantor, he must also make the grandfather a guarantor of the loan. This means that a written affidavit will be given to the bank on behalf of his grandfather, in which a full guarantee of the loan will be taken.
This affidavit will explicitly declare that if you are unable to repay the loan for any reason, you can collect the sum by selling an equal amount of property.
Making the property’s owner a co-applicant
Another option is to make your grandfather or father, in whose name the property is now registered, a co-applicant on your loan. By becoming a co-applicant, you will share the burden of repaying the loan with your grandfather or father. In such a case, the bank can easily provide the loan amount because there is no risk of the loan money sinking.
The third method of getting a loan on ancestral property gained through a gift deed is for the person whose name the property is now in to make a gift deed in your name. It signifies that you hold a property in the name of your grandfather, and his only son is your father, and you are likewise your father’s only son. In such cases, your grandfather can make a gift deed in your name for 50% of the property. After this, you can take a loan from the bank on this gift deed. Keep in mind that even after this you will have to apply for the loan in both the names.