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Home Loan vs. Mortgage Loan - What is the Difference?

There are several different types of secured property loans in the market, and it is normal to be confused about their purpose. You may wonder, ‘What is home mortgage loan?’ or ‘Is there a difference between home loan and mortgage loan in India?’ These are common doubts, and it is important to have them cleared. As a matter of fact, there is a difference, which is why it is important to do the mortgage vs home loan comparison.

To that end, take a look at these pointers highlighting the differences between housing loan and mortgage loan.

What is a Home Loan?

A home loan is a financial product that offers borrowers funds to buy, build, or renovate a home. Lenders offer funds up to a certain percentage of the property value, usually 75-90%, and require borrowers to pay the remainder as a down payment. In this case, the home being purchased or renovated is the collateral.

Besides these features, a home loan also offers unique benefits. For instance, borrowers can avail tax deductions on the principal and interest amount repaid in a given financial year. Further, these offerings are available with a tenor that can range up to 30 years.

What is a Mortgage Loan?

To understand the mortgage loan home loan difference, you must first know what a home mortgage is. This is a type of secured loan approved against a residential property pledged as collateral. These are also known as loan against property, and offer funding based on the market value of the property pledged as a security. The key difference when comparing mortgage loan vs housing loan is that you can use these funds freely to fund any financial obligation of your choice.

Difference Between a Home Loan and Mortgage Loan

  • The biggest difference between a home loan and mortgage loan is that while the funds availed of as a home loan can only be used to finance the purchase or construction of a home, funds availed of as a mortgage loan can be used to meet all kinds of financial needs, such as financing the education or weddings of one's children and paying for medical emergencies. 
  • In many cases, the battle that is home loan vs mortgage loan goes to home loan because one can avail of 80–90% of a property's present market value as a home loan whereas mortgage loans stand at only up to 75% of a property's market value. Thus, it is possible to avail of more funds on a home loan. 
  • Further, another mortgage loan and home loan difference is that home loans draw lower interest rates than mortgage loans. The interest rate on mortgage loans is generally a few percent higher than the interest rate on home loans.

So, Which Product Is the Better One?

So, home loan vs mortgage loan: which is better? Mortgage loan and home loan differences reveal that home loans carry higher benefits. However, since each of these loans is availed of and used for different purposes, weighing the two against each other isn’t a fair comparison.