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    Home Loan VS Loan Against Property

    When it comes to housing loans, two terms are frequently interchanged – home loans and mortgage loans. Here, in this post, you can find the benefits and features of both these popular loan categories helping you choose the right one that meets your borrowing needs.

    First, let’s look at the basic definitions:

    Home loans – Here a borrower takes a loan from the lender to purchase a home, a plot or an under-construction property.

    Loan Against Property – Also known as a mortgage loan or LAP, in short, is a loan taken by a borrower by mortgaging a property they own. Here, the loan amount is mostly used to meet personal or business requirements.

    Difference between Home Loans and LAP:

    The one huge difference between the two is that home loans help you buy property, whereas LAP pledges a property you own to help you secure the required loan funding.

    The next big difference is the usage of funds. In home loans, the loan amount you receive must be used for funding the purchase of your home, whereas, in LAP, there is no restriction on the usage of funds. You can use it for any purpose. Be it financing your child’s marriage, expanding your business, medical expenses or even leisure vacations – the choice is all yours.

    Home Loan

    Here’s a tabular column that contrasts the main features between home loans and mortgage loans:

    Features Home Loans

    Mortgage Loans

    Purpose

    To buy a house, a plot or an under-construction residential property For any business or personal reasons

    Loan Amount

    You can avail loan amounts up to 90% of the value of the property you are looking to purchase

    You can avail a loan amount up to 60% of the value of the property you own

    Interest Rates

    Generally, above 8.7%

    Generally, above 9.5%

    Tenure

    Up to 30 years

    Up to 15 years

    Tax Exemption You can avail tax deductions under Section 80C and Section 24 of the ITA on the principal you pay

    No tax deductions

    Generally, lenders visit the property you are about to purchase before sanctioning your home loan. Similarly, evaluation of the property you own is done before issuing a loan against property. Both are secure loans and involve lengthy documentation processes as the property you own or about to purchase must be evaluated before the lender decides on the loan amount, that you are eligible for.

    Now, let’s look at the benefits of both these loan categories:

    Benefits of Home Loans:

    • Helps you purchase your dream home
    • Offers tax benefits
    • You can transfer the balance to another lender midway
    • Long repayment tenure
    • No prepayment charges

    Benefits of Mortgage Loans:

    • Puts the property you own to use
    • Use the loan amount to fund business or personal needs
    • You get immediate funds
    • Quick approvals
    • Balance retransferring available

    Which Should I Choose?

    It all depends on your specific requirements. Both these loan products cater to different categories of borrowers. So, make sure that you understand the loan product thoroughly, compare different lenders and choose the lender who offers you the best deal.