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Are Home Loan And Mortgage Loan Different?

April 01, 2019   |   Sunita Mishra

We often use the terms home loan and mortgage loan interchangeably without realising that the two are completely different from each other.

Here are certain myths busted about the two banking concepts:

  • To avail of fund from the market, one is supposed to provide a collateral. That is true of all types of mortgages available. So, home loan is a type of mortgage loan — the loan is provided using the property as a collateral. While you can also use other assets as collateral for borrowing funds, in a mortgage loan your property works as a security. Simple out, in mortgage loans, your property is used as a collateral. Most home loans in India are mortgage loans. Which means the banks has the right to sell your property and make up for losses in case you default on repayment.
  • Also read: How To Avoid Mortgage Mishap

  • Home loans have a pre-set nature — it is provided for the purchase of a property. Fund acquired through a mortgage loan, on the other hand, can be used for other purposes, too. This is also the reason why you pay higher interest for availing of mortgage loans. Banks in India extend mortgage loans keeping your property as a collateral to provide you funds for personal use.
  • In case of a home loan, banks make the payment directly to the seller's account. This is a way to ensure that the funds are used only for home purchase. While in case of a mortgage loan where borrowers are free to use the funds anywhere they chose, the payment is made directly to the borrower.
  • Typically, the interest you pay on a home loan is lesser than a mortgage loan. For instance, till June last year, public lender State Bank of India provided home loans at an interest rate of 9.20 per cent. For loan against property, SBI charged an interest between 10.77 per cent and 11.75 per cent, depending on the amount of the loan.
  • Also read: How Mortgage Influences Your CIBIL Score

  • There are also, no tax benefits for salaried employees while paying the mortgage loan, unlike in a home loan. For a home loan of up to Rs 28 lakh fall under the purview of the priority sector lending. Mortgage loans, on the other hand, do not come enjoy this tag.



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