Home Loan vs Mortgage Loan
you may require a loan for a variety of reasons. many different loan products are available in the market today, depending on the circumstances. hence, some of them are easily confused with one another. one such confusing pair is 'home loan' and 'mortgage loan'.
a home loan is a form of loan used to finance the purchase or construction of a home. on the other hand, a mortgage loan has no restrictions on how to invest the loan amount. the distinction between a home loan and a mortgage loan shows that each is suitable for a particular purpose.
in simpler terms, a home loan is the one procured to purchase or build a new house. also called a loan-against-property, a mortgage loan is taken by a property that the borrower already owns.
although significantly different, both home loans and mortgage loans are a secured amount of money used to finance large expenses.
● purpose: only for the construction of a new home or purchase of a property that is ready to move in.
● loan-to-value ratio: a loan of up to 90% of the property's market value can be obtained.
● interest rate: lower in comparison to mortgage loans.
● processing fee: typically, 0.8-1.2% of the loan value is required.
● repayment tenure: up to 30 years.
● top-up facility: most of the institutions have no such facilities in case of home loans. you can't get extra funding on the existing loan.
are you planning to buy your dream home? you might need a home loan calculator to tell you the amount of money you would be repaying each month for a specific loan size and term.
● purpose: there are no restrictions on how the loan money can be used, i.e., to fulfil personal and professional needs.
● loan-to-value ratio: a loan of up to 60-70% of the property's market value can be obtained.
● interest rate: interest rates on mortgage loans are normally 1-3% percentage points higher than those on home loans.
● processing fee: typically, 1.5% of the loan value is required.
● repayment tenure: up to 15 years.
● top-up facility: most of the institutions offer such facilities in case of mortgage loans. you can get extra funding on the existing loans.
based on the total loan amount that you are eligible for, both of these secured loans offer additional services such as top-up loans, balance transfers and so on. you can apply for one based on your financial requirements.
the documents needed for both mortgage and home loans are quite alike:
● proof of income/ recent salary slips
● bank account statements of the last 3-6 months
● aadhar card
● pan card
● proof of address
● it returns
● papers of the property being purchased/ mortgaged
● in the case of mortgage loans, you will also require to have complete documents related to the property you're pledging
to conclude, if one wishes to construct or purchase a residential property, they should go for a home loan. for any other purposes, a mortgage loan is ideal.