Home Loan and Mortgage Loan–The term loan is usually used interchangeably with the term loan, however they’re not constant things. during this article, we are going to observe the 2 product intimately and the way they disagree from one another.
What is Home Loan?
In a loan, a receiver takes cash from the bank to shop for a house or flat or to create a brand new house. you’ll conjointly take a loan to renovate your existing home or purchase land. this sort of loan is typically a secured variety of loan within which the house that the loan is being taken is place as collateral by the investor.
It is issued once the complete loan is repaid by the receiver within the variety of monthly installments. If the receiver is unable to repay the loan and becomes insolvent, the investor has the proper to liquidate the house to recover the unfinished dues.
The loan-to-value (LTV) quantitative relation or the share of the number that may be supported through a loan is high at around 85-90%. this is often one amongst the key variations between loan and loan. Also, the house loan comes with each a hard and fast rate and a floating rate possibility.
The home loan tenure in Asian country is up to a most of thirty years. Home loans conjointly attract a process fee that is typically zero.5-1% of the loan quantity.
What is a Mortgage Loan?
Unlike a loan, loan is taken and employed by the receiver for any purpose. However, it shares a similarity with a loan — the investor takes possession of the borrower’s property till the compensation is complete. Mortgages have associate degree LTV quantitative relation of 60-70%.
This means the receiver are eligible to receive solely 60-70% of the present value of the collateral within the variety of a loan. The process fee on these loans is usually one.5% of the loan quantity, and a indefinite quantity facility is additionally obtainable.
This facility permits the receiver to urge extra funds on the prevailing loan while not abundant work. In loan, the tenure is up to fifteen years. The interest rates on mortgage loans square measure slightly higher (1-4%) than the interest rates offered on home loans.
Home Loan Vs Mortgage loan
- The table below offers a tabular distinction between loan and loan on some key parameters.
- Parameters loan mortgage loan
- Definition Intent to buy residential property or a chunk of land there’s no restrictive covenant on this sort of loan. receiver will use the loan quantity for any purpose
- Loan-to-Value (LTV) quantitative relation generally 85-90% of the present value of the property 60-70% of the present value of the property
- Rate of interest less than mortgage loans 1-3% above that of home loans
- Processing fee zero.8-1.2% of total loan quantity one.5% of total loan quantity
- Loan tenure up to thirty years up to fifteen years
- Tax edges offered underneath section 80C, section 24, section 80EE, section 80EEA, no tax break
Documents needed to urge loan in Asian country
For loan still as loan, the documents square measure a lot of or less same. Given below could be a careful list of documents needed whereas applying for a loan or loan in India:
ID Proof (PAN Card, Aadhar Card, license, elector ID Card)
- Address proof (electricity bill, house bill, water bill, passport, or the other ID proof)
- Income proof document
- Bank details
- Property documents
- Income tax come back
FAQ concerning loan or loan
Q. that is cheaper supply of funding, loan or mortgage loan?
Ans :- If {you square measure|you’re} progressing to purchase a flat or house then loan is cheaper because the rates and process fee on loan are less than the interest rate and process fee.
Q. Is there any collateral demand in loan or mortgage loan?
Ans :- Yes, the property or house you’re progressing to purchase or build a brand new house is the collateral in these loans.
Q. could be a Loan Against Property a sort of mortgage loan?
ans:- Yes, Loan Against Property could be a kind of loan.