Many people assume that a mortgage loan and a home loan are the same. In reality, both are different in purpose, structure, and usage. Understanding this difference helps you choose the right loan and avoid costly mistakes.
What Is a Mortgage Loan?
A mortgage loan is a loan where you pledge an existing property as collateral to borrow money. The property can be residential, commercial, or even land. You do not need to buy a new house to take this loan.
The lender holds legal rights over the property until the loan is fully repaid. The borrowed amount can be used for any purpose such as business expansion, medical expenses, education, or debt consolidation.
Key Points of Mortgage Loan
- Property is already owned by the borrower
- Loan amount depends on property value
- Funds can be used for multiple purposes
- Interest rate is usually higher than home loans
What Is a Home Loan?
A home loan is specifically designed to purchase, construct, or renovate a residential house or apartment. The property being purchased becomes the collateral for the loan.
This loan is purpose-specific, meaning the funds can only be used for housing-related needs. Home loans usually come with longer repayment tenures and lower interest rates.
Key Points of Home Loan
- Loan is taken to buy or build a house
- Property under purchase is the collateral
- Usage is limited to housing purposes
- Lower interest rates compared to mortgage loans
Mortgage Loan Vs Home Loan: Core Differences
Purpose of the Loan
A mortgage loan offers flexibility in usage, while a home loan is strictly for housing purposes.
Property Status
In a mortgage loan, the property is already owned. In a home loan, the property is being purchased or constructed.
Interest Rates
Home loans generally have lower interest rates because they are supported by housing policies and lower risk.
Loan Tenure
Home loans usually offer longer tenures, making monthly payments more affordable.
Mortgage Loan Vs Home Loan Comparison
| Feature | Mortgage Loan | Home Loan |
|---|---|---|
| Loan Purpose | Any personal or business use | Buying or constructing a house |
| Collateral | Existing owned property | Property being purchased |
| Interest Rate | Higher | Lower |
| Maximum Tenure | Shorter | Longer |
| Tax Benefits | Limited or none | Available under applicable laws |
| Loan Amount | Based on property value | Based on property cost and income |
Which Loan Should You Choose?
Choose a home loan if your goal is to buy or build a house and you want lower interest rates with long-term repayment. Choose a mortgage loan if you already own property and need funds for non-housing purposes.
Making the right choice depends on your financial goal, repayment capacity, and how you plan to use the borrowed amount.
