When buying property, you’ll often hear the terms “home loan” and “mortgage” used interchangeably. However, they are not exactly the same. Understanding the difference between a home loan and a mortgage is crucial for making informed financial decisions.
At Today Finserv Consulting India, we simplify complex financial concepts for you. In this guide, we’ll break down the key differences, benefits, and when each term applies.
Home Loan vs. Mortgage: Key Differences
| Aspect | Home Loan | Mortgage |
|---|---|---|
| Definition | A loan provided by a bank/NBFC to buy a home. | A legal agreement where property is used as collateral for a loan. |
| Purpose | Specifically for purchasing residential property. | Can be used for various loans (business, personal) using property as security. |
| Ownership | Borrower owns the property after full repayment. | Lender holds a lien on the property until the loan is repaid. |
| Interest Rates | Lower rates since it’s a secured loan. | Depends on loan type (may be higher if not a home loan). |
| Foreclosure Risk | Default leads to property seizure by the lender. | Same risk, but applies to any loan secured by property. |
What is a Home Loan?
A home loan is a financial product designed specifically for purchasing, constructing, or renovating a residential property.
Key Features:
✔ Long-term repayment (up to 30 years)
✔ Lower interest rates (compared to personal loans)
✔ Tax benefits under Section 24 & 80C of the Income Tax Act
✔ Property as collateral (but loan is only for home purchase)
What is a Mortgage?
A mortgage is a legal agreement where a borrower pledges property as security for a loan. It’s not limited to home loans—it can apply to business loans, personal loans, etc.
Key Features:
✔ Collateral-based loan (property is security)
✔ Can be used for any purpose (not just home buying)
✔ Risk of foreclosure if payments are missed
✔ Longer processing time due to legal formalities
When is a Home Loan Called a Mortgage?
- A home loan becomes a mortgage when the property is used as collateral.
- In India, all home loans are technically mortgage loans because the bank holds the property papers until repayment.
- However, not all mortgages are home loans—you can mortgage property for other loans.
FAQs on Home Loan vs. Mortgage
1. Is a home loan the same as a mortgage?
No. A home loan is specifically for buying property, while a mortgage is any loan secured by property.
2. Can I get a mortgage without a home loan?
Yes! You can mortgage property for a business loan, personal loan, or LAP (Loan Against Property).
3. Which has lower interest rates—home loan or mortgage?
Home loans usually have lower rates because they are for residential purposes. Mortgage rates vary based on loan type.
4. What happens if I default on a home loan vs. a mortgage?
In both cases, the lender can seize the property through legal foreclosure.
5. Can I transfer a home loan to another property?
Some lenders allow balance transfers, but mortgages are tied to the pledged property unless refinanced.
