Home Loan vs Mortgage Loan: Which One Should You Opt For?
Loans have become one of the most crucial things, and with the growing need comes confusion. There is a wide variety of loans that a lender offers. The borrower needs to be clear with what he desires to do with the fund the loan category opts likewise. Today we will be focusing on the loans required for property and the categories that fall into them.
Whenever someone talks about a house, you must have heard of a home loan or a mortgage loan. These loans are involved in the property-based scenario. These loans are both secured loans and have similar services. However, they are different from one another. Continue with the blog to know all about home and mortgage loans.
What are Home Loans and Mortgage Loans?
Home loans are generally taken to build or finance the purchase of a home loan. They come in a wide loan variety. When one applies for a home loan, they are asked to choose from:
- Home Renovation Loan
- Home Extension Loan
- Top-Up Home Loan
- Plot Loan
- Construction Loan
- Home Loan Balance Transfer
- Non-Residential Premises Loan
While on the other hand, mortgage loans do not require any classification on the use of the fund. The borrower is not restricted in any way to use his fund. These loans are taken for the property that the borrower already owns.
Home Loans vs Mortgage Loans, How are they Different from One Another?
Both the mortgage and home loans might sound analogous, but they are not. Even if we talk about the home and mortgage loan interest rate, it is not the same. Below are the differences between both of the loans.
- The purpose of choosing the loan is either construction or purchase
- The borrower can avail up to 90% of the properties market value
- The processing fee ranges from 0.8% -1.2% of the loan value asked for
- It offers loan tenures of up to 30 years
- The interest rates are lower than that of mortgage
- There is no restriction on how the borrower chooses to use the fund. He can either use it in property associated issues or to fulfil any personal need.
- The borrower can only avail of 60% -70% of the properties market value, which is comparatively lower than home loans.
- The mortgage loan interest rate has a variation of 1% – 3% than that charged in a home loan.
- The repayment tenure is up to 15 years
- The processing fee is higher and ranges around 1.5% of the loan amount.
- No additional paperwork on top-ups or extra funding
Which one should you choose?
You can opt for any of these depending on your need, as both loans are different from one another and serve different purposes. If you require a loan for construction or purchasing purposes, then go for Home Loan.
The interest rate and processing fee are also low compared to a mortgage loan. The loan to value ratio is also high. However, the loan is restricted and long tenure can charge you more interest over time.