The main difference between a home loan and loan against property is that a home loan is taken for the property and mortgage loan is taken against the property. The loan is given on the basis of the property value as per the market.
Full Answer
What is a loan against property?
A loan against property is a mortgage loan. Many times, home loans and loans against property are also used interchangeably but they are categorized as different loans. A home Loan, Mortgage or Loan against property looks and sound similar – however there are technical differences across all three products.
What is the difference between a mortgage and a loan?
Mortgage loan or a loan against property means that the loan is also given against the property which is held as a security. This is implied in the title of the loan. However as said, in India, all three are essentially the same, as no bank will be giving a loan unless they have the necessarily collateral, which is the property.
What is the difference between home equity loan and mortgage?
Home Equity Loan Basics. A home equity loan is also a mortgage. The difference between a home equity loan and a traditional mortgage is that you take out a home equity loan after you have equity in the property, while you get a mortgage to purchase the property.
Who owns the property in a mortgage?
In mortgage loan, the property or any security is offered as a guarantee when getting a loan. While the borrower has the possession of the property, the lender is one who owns it until the debt is completely paid off. A mortgage loan is given for an open end use and the payment is made directly to the borrower.
Is home loan and loan against property same?
A home loan is a loan taken to facilitate the purchase or construction of a new home; the property does not already belong to the loan applicant. In contrast, a loan against property is taken by keeping an existing property as security, with the loan being used to fulfill various purposes.
What is the difference between home loan and mortgage loan?
A home loan provides funding to help you upgrade, construct, or buy a residential property. Lenders consider the home or the property as the collateral for the loan. Mortgage loans on the other hand are loans that are taken against a property collateral, i.e. loan against properties.
What is the meaning of loan against property?
A loan against property(LAP) is a secured loan that is sanctioned against the asset pledged as collateral. This asset can either be an owned land, a house, or any other commercial premises. The asset remains as collateral with the lender until the entire loan against property amount is repaid.
Why is a home loan called a mortgage?
The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure.
Can loan against property be converted to home loan?
Besides this, a Home Loan has a longer repayment tenure making the EMI more affordable as well. In addition to this, customers can avail tax benefits that are not available with a Loan Against Property. However, it is not possible to convert an existing Loan Against Property into a Home Loan.
What is the advantage of loan against property?
Get a Loan at Lower Interest Rates: One of the most significant advantages of a loan against property is its low interest rates. Since a loan against property is a secured loan, hence the lenders provide these loans at a lower interest rate as the risk factor is negligible.
Is it good to take loan against property?
If you have a fully constructed residential or commercial property without any other encumbrances, a Loan Against Property is the best option compared to any other type of loan. It offers large sums of money for a lower rate of interest as the loan is secured by the collateral, your property.
Which bank is best for loan against property?
Check out the Best Loan Against Property SchemesBankInterest RateLoan AmountHDFC Bank8.00% p.a. - 8.95% p.a.Up to 65% of the value of the propertyIDFC First7.5% p.a. onwardsUp to Rs.7 croreTata Capital10.10% p.a. onwardsRs.10 lakh – Rs.3 croreAxis Bank7.90% p.a. -9.30% p.a.Rs.5 lakh – Rs.5 crore4 more rows
What is meant by mortgage loan?
A mortgage loan is a secured loan that allows you to avail funds by providing an immovable asset, such as a house or commercial property, as collateral to the lender. The lender keeps the asset until you repay the loan.
Is it cheaper to get a loan or a mortgage?
Even including the arrangement fees, a mortgage is still likely to be cheaper than taking out a personal loan. However, to be absolutely certain of which would give you the better deal you need to compare the total cost of borrowing - including arrangement fees for the mortgages - of the two types of loan.
What is a loan against property?
A loan against property is actually a mortgage loan . In this, a borrower can pledge his existing, self-owned property for a sum of amount that equals a particular percentage of the market price of the property he owns. He must hand over the property documents to the lender until the time he repays the loan and therefore the loan, just like the home loan, is often repaid in EMIs consisting of the principal loan amount taken and therefore the rate of interest. If the borrower defaults on repaying the loan, the lender can sell the pledged property to recover his investment.
What is a home loan?
A home loan is actually a loan you’re taking to buy a ready-to-move-in house, a property under construction, or a plot of land on which you plan to create a house. This is often a secured loan offered by banks or housing finance companies and therefore the buyer must pay a down payment. The lender charges a fixed or floating rate of interest on the loan and therefore the buyer must repay the loan in monthly EMIs. The lender continues to be the owner of the property until the borrower pays off the EMIs after which the ownership is formally transferred to the borrower. If the borrower defaults on EMIs, the lender can auction it off to recover losses.
How long does it take to get a home loan approved?
Process of Documentation: Usually, home loans required around 15 days to be approved and sanctioned and have a comparatively simple documentation process. However, loans against property take longer to be processed as banks and lending institutions need to get the property valued also as obtain and check upon the personal information of the borrower.
How long is a home loan tenure?
Tenure: The loan tenure you’ll avail for a loan against property and home loans tends to differ. Typically, home loans have tenures of 20 years and may go up to a maximum of 30 years. However, while still long, most loans against property have a maximum loan tenure of 15 years.
What is a top up option on a home loan?
Top-Up Option: Almost all loans against property have the option of a top-up, which suggests that you simply can get more funding if necessary, on your existing loan. This provides you more flexibility and allows you to use a similar loan for multiple financial obligations. Typically, home loans don’t have such a facility, however, some banks and lending institutions may provide you with a similar dependent on further assessment.
What is a home loan?
A "home loan" means that a home is serving as collateral to secure the debt. To secure the debt, the lender obtains a mortgage. Remember, the owner of the property "gives" a mortgage to the lender--i.e., he or she gives the lender the right to lien the property. A creditor must have the right to lien property.
Why are mortgages and loans used interchangeably?
The reason home loans and mortgages are so often used interchangeably in conversation is because of how closely their related and work together. For example, when you take out a home loan to purchase your home, you then sign for a mortgage agreeing to pay back the home loan in monthly payments. In order to understand how your home buying process works, you must understand the difference.
What is a lien on a property owned by the debtor?
This right can come from statute or from the owner. If a creditor obtains a judgment, for example, that judgment becomes a lien (by statute) on property owned by the debtor. A mortgage is a contract by which the owner (known as the mortgagor) gives the lender (the mortgagee) the right to encumber the property.
What is a mortgage loan in India?
In case of mortgage loan and loan against property, the asset, i.e., the property, could be a commercial property or a residential property. The term ‘mortgage loan’ is usually not used in India.
What is a secured loan called?
Any type of secured loan is called a mortgage loan . 2nd questions are what is the difference between home loan & loan against property? This is very simple whenever you buying any residential property to take the home loan and when you have any existed property and you take the loan against that property, this is called Loan against property.
What happens if a borrower defaults on a home loan?
If at any time a borrower defaults on the loan, the bank has the right to liquidate the collateral to recover the outstanding loan cost.
What happens if you don't pay your mortgage?
If you do not pay your mortgage payments, the bank can foreclose on your property and sell it to someone else. Mortgages can be used to purchase any piece of real estate, be it residential or commercial.
Is it commonplace to take home loans?
Taking home loans and loans against property is commonplace. However, when it comes to understanding the difference between these two terminologies, applicants are often left confused; we end up using these two terms interchangeably in casual conversation.
Does Tata Capital offer home loans?
Tata Capital offers easy housing finance with home loans designed to meet your needs with speedy disbursals and attractive home loan interest rates. We provide our customers with a free and reliable EMI calculator for home loan using which, you can get an estimation of your monthly EMIs.
What is a loan against property?
Loans against property are multi-purpose loans. Flexible tenor for loan against property. Avail top-up facility in loan against property. Individuals require loans for various purposes. There are so many products in the market that a person can get easily confused. A prime example of this is a home loan and a loan against property ...
Why is the interest rate of a home loan lower than that of a loan against property?
This is because the government and the Reserve Bank of India (RBI) is focussed on making housing affordable for all, and the result of this is minimizing the margin requirement of a home loan.
How long does a loan against property last?
The tenure for both home loan and loan against property is significant. Typically, the tenure for home loans lasts for 20 years. Loan against property is also a high-value loan and takes several years to pay back. They usually come with a tenure of 15 years.
What is a home loan?
A home loan is a loan that is taken to facilitate the purchase or construction of a new home; that is, the property does not already belong to the loan applicant. Whereas, a loan against property is taken by keeping an existing property as security, with the loan taken being used to fulfil a variety of purposes.
How long does a secured loan last?
Considering similarities, both secured loans come with a longer repayment tenor up to 20 years, balance transfer facility, top-up loan, etc. Apply for one according to your financial requirements.
Is it expensive to buy a house?
Purchasing a house is easily one of the biggest expense an individual incurs in his lifetime. Real estate is expensive , and a lot of money is required to get your own house. To this effect, home loans grant a higher percentage compared to the value of the property – up to 90%.
What is the difference between a home loan and a mortgage loan?
A mortgage loan, on the other hand, has no restriction on the usage of the loan amount. The difference between home loan and mortgage loan makes it clear that each is ideal for its own purpose. You may need a loan for many different reasons.
What is a home loan?
In simple terms, a home loan is a loan taken to buy or construct a new home – i.e. the property is not owned by the loan applicant. A mortgage loan, also known as a loan against property, is a loan secured by a property that the loan applicant already owns. The question of which among the two is better is not really relevant, ...
How long is a mortgage loan?
Both home loans and mortgage loans offer long tenures. The tenure for a home loan can be as long as 30 years. The tenure for a mortgage loan is typically 15 years, but many lenders offer a longer tenure of up to 20 years. These loans also allow you to make partial or full pre-payments to reduce the tenure or EMI, based on your financial conditions
How much higher is a mortgage loan?
It can be used to meet both a personal requirement or a business requirement. Mortgage loan interest rates are generally 1 to 3 percentage points higher than home loan interest rates.
Why are home loan interest rates lower than mortgage interest rates?
This is because the government of India wants to make homes affordable for everyone and therefore RBI has minimized the margin requirements on home loans.
How much is the processing fee on a mortgage?
Processing fee. Typically between 0.8% to 1.2% of the loan value. Typically at 1.5% of the loan value. Repayment tenor.
Can you claim Section 24 on a home loan?
Further, you can also claim an exemption under Section 24 on the interest payment on your home loan. No tax benefits are available on general-purpose mortgage loans. Must Read: 5 Things to Consider Before Applying a Loan against Property.
What is mortgage loan?
A mortgage is typically the lending tool that allows a buyer to purchase (finance) the property in the first place. As the name implies, a home equity loan is secured—that is, guaranteed—by a homeowner's equity in the property, which is the difference between the property’s value and the existing mortgage balance.
What Is the Difference Between Mortgages and Home Equity Loans?
Mortgages and home equity loans are both borrowing methods that require pledging a home as collateral, or backing, for the debt. This means the lender can seize the home eventually if you don't keep up with your repayments. While the two loan types share this important similarity, there are also key differences between the two.
What happens if you fall behind on your mortgage payments?
If a borrower falls behind on payments, the lender can seize the home, or collateral, in a process known as foreclosure. The lender then sells the home, often at an auction, to recoup its money. Should this happen, this mortgage (known as the "first" mortgage) takes priority over subsequent loans made against the property, such as a home equity loan (sometimes known as a "second" mortgage) or home equity line of credit (HELOC). The original lender must be paid off in full before subsequent lenders receive any proceeds from a foreclosure sale. 2
What is a first mortgage?
The lender then sells the home, often at an auction, to recoup its money. Should this happen, this mortgage (known as the "first" mortgage) takes priority over subsequent loans made against the property, such as a home equity loan (sometimes known as a "second" mortgage) or home equity line of credit (HELOC).
What is the difference between a home equity loan and a traditional mortgage?
One key difference between a home equity loan and a traditional mortgage is that the borrower takes out a home equity loan when they already own or have equity in the property. Lenders generally allow you to mortgage up to 80% of a home's value; the percentage you can borrow via a home equity loan varies depends on how much ...
Why are home equity loans and mortgages so similar?
Ironically, home equity loans and mortgages have become more similar in one respect— their tax deductibility. The reason: the Tax Cuts and Jobs Act of 2017 .
How much can you borrow from a home equity loan?
Lenders generally allow you to mortgage up to 80% of a home's value; the percentage you can borrow via a home equity loan varies depends on how much of the home you own outright.
What is a fixed rate mortgage?
One type of fixed-rate mortgage is a jumbo loan. Right for: Homeowners who crave predictability and aren’t going anywhere soon may be best suited ...
What is the difference between a fixed rate and a conventional loan?
For your mortgage payment, you pay X amount for Y years—and that’s the end for a conventional loan. A fixed-rate loan will require a down payment. The rise and fall of interest rates won’t change the terms of your home loan, so you’ll always know what to expect with your monthly payment. That said, a fixed-rate mortgage is best for people who plan to stay in their home for at least a good chunk of the life of the loan; if you think you’ll move fairly soon, you may want to consider the next option.
How long is the FHA loan term?
FHA loans are fixed-rate mortgages, with either 15- or 30-year terms. Buyers of FHA-approved loans are also required to pay mortgage insurance —either upfront or over the life of the loan—which hovers at around 1% of the cost of your loan amount.
What is USDA loan?
USDA loan. Another government-sponsored home loan is the USDA Rural Development loan, which is designed for families in rural areas. The government finances 100% of the home price for USDA-eligible homes—in other words, no down payment necessary—and offers discounted mortgage interest rates to boot. Right for: Borrowers in rural areas who are ...
How long does an adjustable rate mortgage last?
Unlike fixed-rate mortgages, adjustable-rate mortgages (ARM) offer mortgage interest rates typically lower than you’d get with a fixed-rate mortgage for a period of time—such as five or 10 years, rather than the life of a loan.
Is a down payment good for an FHA loan?
Right for: Home buyers with meager savings for a down payment are a good fit for an FHA loan. The FHA has several requirements for mortgage loans. First, most loan amounts are limited to $417,000 and don’t provide much flexibility. FHA loans are fixed-rate mortgages, with either 15- or 30-year terms.
Is it a one mortgage fit all model?
If you’re a first-time home buyer shopping for a home, odds are you should be shopping for mortgage loans as well—and these days, it’s by no means a one-mortgage-fits-all model. Where you live, how long you plan to stay put, and other variables can make certain mortgage loans better suited to a home buyer’s circumstances and loan amount.
What are the different types of mortgages?
This will depend on your individual needs and qualifications. Types of mortgage loans include: 30-year and 15-year fixed-rate loans. These are mortgages where the interest rate is fixed and the principal and interest payment stay the same over the life of the loan. Adjustable-Rate Mortgage.
What does it mean to choose the right mortgage?
Choosing the right mortgage means understanding what is available based on your needs. Choose a mortgage lender and apply: When you first start looking for mortgages, you may see offers from lots of lenders. Compare rates and services before choosing the one that's right for you.
What is a primary property?
A primary property is a home you'll use as your primary residence. When you apply for a mortgage on a primary property or residence, you’re confirming you’ll be living there.
What is an investment property?
An investment property is a property that's being purchased with the goal of generating rental income. Banks see these investments as having a reasonable amount of risk so they are less likely to lend to investors.
What is the purpose of learning what each property type is?
Learning what each property type is, and how they differ from one another, can help you understand which loan you need to apply for.
Why do lenders lend to buyers?
Lenders may feel more confident lending to buyers who are using their home as a primary residence since they will be working directly with the people who are going to be living in, and caring for, the home.
What are the requirements for a loan?
Understand basic loan requirements: This includes knowing your debt-to-income ratio, credit score and verifying the value of your assets.