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What is a home loan and how is it different from a mortgage loan?
Several property loans are available in the market so, the most common confusion that arises among the borrowers is between a home loan and mortgage loan as they are thought to be the same. But there is a huge difference between both of the loans. Let's take a look at the key differences between home loan and mortgage loan.
What is a home loan?
Home loans are secured loans, meaning the lender will use the home as collateral to protect the loan. In simple words, home loans are the amount of money borrowed from a bank or a financial institution to purchase a house or flat. This borrowed amount can be used to buy or build property.
What is a mortgage loan?
A mortgage loan is a secured loan borrowed from a lender by giving an immovable asset for example a house or any property as a security. In other words a mortgage loan is an amount given against a property or house which is kept as a security. The property is kept by the lender until the loan is repaid.
Differences between a mortgage and home loan
- A mortgage loan can be used for any kind of expense like education, wedding etc whereas a home loan can only be used for purchasing or constructing a home.
- Home loan can cover around 80-90% of the current market value of a property whereas mortgage loan can cover only upto 75% of the value of property
- Home loans have lower interest rates than mortgage loans.
- Processing fee for mortgage loan is higher than home loan
- Home loans have a longer payback duration as compared to mortgage loans. Home loan offers 30 years whereas mortgage loan offers 15 years tenure.
| Basis of Distinction | Home Loan | Mortgage Loan |
|---|---|---|
| Meaning | Home loan is a loan borrowed to buy a home or property. | Mortgage loan is a loan borrowed by keeping a property or home as a security. |
| Loan-to-value ratio | It covers 80-90% of the current market value of the property | It covers only upto 70% of the value of property. |
| use | Loan amount can be used for the purchase or construction of a home. | Loan amount can be used for any expense. |
| Rate of Interest | Lower rate of interest | Higher rate of interest |
| Processing Fee | Lower processing fees. | Higher processing fees |
| Tenure | 30 years tenure | 15 years tenure |
| Tax benefits | Tax benefits under Section 80C, Section 24, Section 80EE, Section 80EEA, | No tax benefits |
