Introduction
When it comes to property-related financing, the terms mortgage loan and home loan are often used interchangeably. However, they are not the same. Understanding the difference between a mortgage loan and a home loan is essential before making any borrowing decision. Both are secured loans involving real estate, but they serve different purposes and have different eligibility criteria, interest rates, and repayment terms.
In this blog, we’ll break down the key distinctions so you can choose the right loan for your needs.
What Is a Home Loan?
A home loan is a type of financial assistance provided by banks or financial institutions to help individuals purchase, construct, or renovate a residential property. The property being purchased serves as the collateral.
Common Uses of a Home Loan:
- Buying a new or resale flat/house
- Building a home on your own plot
- Home renovation or extension
- Buying a plot (with plans to construct)
Features:
- Lower interest rates compared to other loans
- Tenure up to 30 years
- Tax benefits under Sections 24(b) and 80C
- Disbursed in stages (especially for under-construction homes)
What Is a Mortgage Loan?
A mortgage loan, also known as a loan against property (LAP), is a type of loan where a borrower pledges an existing property (residential or commercial) to get funds for non-housing needs.
Unlike home loans, the borrowed amount is not necessarily used to buy property — it can be used for education, business expansion, medical emergencies, or any personal financial requirement.
Common Uses of a Mortgage Loan:
- Business funding
- Large personal expenses (marriage, education, travel)
- Consolidation of existing debts
- Medical emergencies
Features:
- The property is used as collateral
- The loan amount depends on the value of the pledged property
- Higher interest rates than home loans
- No tax benefits for general use (unless used for business)
Key Differences Between Mortgage Loan and Home Loan
Here’s a clear side-by-side comparison:
| Feature | Home Loan | Mortgage Loan (LAP) |
|---|---|---|
| Purpose | Buying/building/renovating a home | Raising funds using owned property |
| Property Type | Property to be purchased | Already owned residential/commercial property |
| Interest Rate | Lower | Slightly higher |
| Tax Benefits | Yes (Sections 24 and 80C) | No (unless for business use) |
| Disbursement | Linked to property construction | Lump-sum or as needed |
| Tenure | Up to 30 years | 5 to 20 years |
| Loan Amount | Based on the property’s market value | Based on property’s market value |
Which One Should You Choose?
Choose a Home Loan if:
- You are purchasing or constructing a new house.
- You want to take advantage of income tax benefits.
- You’re looking for a longer repayment tenure with lower interest rates.
Choose a Mortgage Loan if:
- You already own a property and need funds for other purposes.
- You’re running a business and need a quick loan with flexible usage.
- You don’t want to sell your asset but want to monetise it.
Conclusion
While both loan types involve property as security, their usage, benefits, and conditions differ significantly. Understanding the difference between a mortgage loan and a home loan will help you make an informed choice based on your personal or business needs.
Always compare interest rates, check eligibility, and consult with financial advisors before applying.
Final Thought
Still unsure which loan suits you best? Drop your questions in the comments, and we’ll help you decide!
