Home Loan vs. Loan Against Property

Do you also yearn to own that ideal tiny house for your family? With so many loan alternatives available, are you still perplexed? Do you receive a lot of financial advice from others that you can’t rely on? Come to the actual financial professionals then!

Let’s clear up the misconception first and main. We are aware of the ongoing dispute regarding loans against property and house loans. Additionally, despite the fact that they are significantly different, many of us frequently use home loans and loans secured by property interchangeably.

A home loan is money borrowed from a bank or lender to help with the purchase of residential property. It might also be appropriate for buying a new house.

When you take out a loan for something (like education) and use your property as security for the loan, that is said to be a loan against property.

We are certain that you can now clearly differentiate here between a home loan and a loan secured by real estate. If you’re still unclear, we can clear up any questions that come to mind!

Mortgage Loan vs. Home Loan

Choosing between a home loan and a loan against property has always been difficult. So let’s go more deeply into the topic to aid you in making decisions! Home loans and loans against property have features and advantages that are as unique as they are. The fact that both home loans and loans against property are used to pay for the expensive goods, however, is where they are similar.

Let’s go on to talking about the various things that could affect your option:

Housing Loan

• It can be used to purchase a home that’s also ready to move into, invest in a construction project, build a new home, or obtain home renovation or home expansion.
• 90% of the market value of the property may be covered by the LTV* of a mortgage.
• Under Section 24, you may deduct up to Rs 2 lakh from your total income for the worth considerably of the annual EMI you pay.
• Under Section 80, you can deduct up to Rs 1.5 lakh from your total income for the worth considerably of the annual principal amount paid (C).
• Since a home loan’s term is typically longer, the borrower can benefit from its tax advantages for up to 30 years.

The loan-to-value (LTV) ratio compares the size of your mortgage to the property’s appraised worth. Your LTV ratio will be lower the bigger your down payment.

It’s interesting to note that using a house loan EMI calculator beforehand allows you to manage your debts and expenses by calculating the Easy Monthly Installments (EMI). 

Loan secured by property

• There are no restrictions on how a mortgage loan may be used, such as for company purposes and other personal needs.
• A loan against property has a maximum LTV* of 60–70% of the market value of the asset.
• Comparatively speaking, the interest rate on LAP is much higher than the interest rate on a home loan.
• While the maximum loan term for a home loan is 30 years, it is 10 to 20 years for LAPs.
• Get loan against property without income proof

Home loans and loans against property: Comparative advantages

• used to pay for the expensive expenses
• Both secured loans have extended repayment terms.
• Repayment terms may be as long as 20 to 30 years.
• Facility for balance transfers
• Depending on the lender, top-up loans and other options may be available.

Your ability to take out a home loan or a loan against property depends on your financial situation. A further comparison of the mentioned parallels between a home loan and a loan guaranteed by property is provided here:

Amount of Loan

Compared to loans against property, home loans provide a greater proportion of the purchase cost. This means that although mortgage loans can only lend up to 60 to 70% of the entire value of the property, housing loans can supply up to 90% rate of interest.

Loan Terms

Both home loans and loans secured by property have fairly long loan terms. Home loans, on the other hand, are better loans against property in this situation and can last up to 30 years, as opposed to the 15-20 years of mortgage loans.

Top-up Subject to a continuous and solid repayment history and depending on the maximum market value of the property, you can obtain a top-up loan on both a home loan and a loan against property. Simply said, it means you can borrow more money for your present loan balance. You have additional flexibility and convenience thanks to the top-up function in both loan against property and house loans, which let you use the same loan for various financial needs including home improvements, furniture upgrades, and more. Home loans have fixed payments that can’t be simply adjusted. However, some banks do provide this facility following a thorough evaluation.