Home Loan vs Mortgage – Which One Is Right for You?
Many people use the terms home loan and mortgage interchangeably, but they are not exactly the same. While both involve borrowing money using property as security, their purpose and structure are different. Understanding the difference between home loan and mortgage is important if you’re planning to buy a home, renovate property, or need funds for personal or business use. In this article, we will explain both options in simple terms and help you choose the right one for your financial needs.
1. What Is a Home Loan?
A home loan is a loan taken specifically to purchase or construct a residential property. The bank lends you money to buy a house or flat, and you repay it in monthly instalments (EMIs) over a fixed tenure.
Key Features:
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Purpose: Buying or building a home
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Security: The home you buy becomes collateral
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Interest Rate: Usually lower than personal loans
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Tenure: Up to 30 years
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Tax Benefits: You get tax deductions on both principal and interest under Sections 80C and 24(b)
Ideal for: People looking to buy a new home or build one on a plot.
2. What Is a Mortgage Loan?
A mortgage loan (commonly called a loan against property) is a type of secured loan where you pledge an existing residential or commercial property to get funds.
Key Features:
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Purpose: Can be used for any reason – business, education, medical, etc.
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Security: You use already owned property as collateral
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Interest Rate: Slightly higher than a home loan
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Tenure: Usually up to 15 years
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No Tax Benefits: Unlike home loans, mortgage loans do not offer tax deductions
Ideal for: People who need large funds but do not want to sell their property.
3. Major Differences: Home Loan vs Mortgage Loan
| Feature | Home Loan | Mortgage Loan (Loan Against Property) |
|---|---|---|
| Purpose | Buy or build a house | Any personal or business need |
| Collateral | The home being purchased | Already owned property |
| Tax Benefits | Available under 80C and 24(b) | Not available |
| Interest Rate | Lower (starting around 8.4%) | Slightly higher (starting around 9%) |
| Loan Tenure | Up to 30 years | Up to 15 years |
| Processing Time | Usually faster | May take more time due to valuation |
4. Which One Should You Choose?
Choose a home loan if:
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You want to buy or build a house
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You are looking for long-term repayment with tax benefits
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You want lower interest rates
Choose a mortgage loan if:
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You already own a property and need funds
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You want to use your property without selling it
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You need money for business, education, or emergencies
5. Tips to Get the Best Deal
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Compare interest rates from different banks
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Maintain a good credit score (750+ is ideal)
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Choose a repayment plan that suits your income
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Ask for a clear explanation of terms and processing fees
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Read the loan agreement carefully before signing
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Conclusion
Understanding the difference between a home loan and a mortgage loan is essential before applying. While both are secured loans, a home loan is ideal for buying property, and a mortgage loan is better for getting funds using your existing property. Choose the one that aligns with your goals, repayment ability, and financial plans. Always compare options and talk to your bank or financial advisor to make an informed choice.