Home Loan

Home Loans and Mortgages – Here’s What You Should Know

It is becoming increasingly difficult for one to finance a home without exhausting their life savings. However, home loans are an excellent option to make one’s dream of having a home come true. 

Mortgage Loan

Mortgage loans are available for buying a home against a property that the borrower already owns. These loans are also called Loans against Property or LAP loans. The lenders do not cap the end usage of the loan amount available, as you can use the loan against mortgage property for any purpose. Calculating your EMI in advance using a mortgage loan EMI calculator will help you plan your repayments easily.

Home Loans

Home loans are finances provided to construct or buy a residential property. Financial institutions can sanction 75% of the price of the property. The remaining money needs to be paid by the borrower. Hence it is essential to know how much loan you are eligible for before choosing a lender. You can quickly determine this value approximation with the help of a free online tool called the home loan eligibility calculator. The loan amount sanctioned can only be used to finance a home, not for additional purposes.

Conclusion

It is important to choose a loan based on your requirements. It is better to go for home loans only if you are planning to take a loan for construction and purchase. Mortgage loans are beneficial if you wish to take a top-up loan over your existing loan. Additionally, home loan tenure extends up to 30 years, while mortgage loans have a lower tenure up to 15 years. It also helps you save a lump sum amount in tax deduction every year.

Additional Read: 5 Tips to Getting the Best Deal on a Mortgage Loan

Is a Personal Loan Better Than a Home Loan?

Comparing two different loan instruments is a difficult task. But, let us first begin by capturing the difference between the two.

Personal LoanHome Loan
DefinitionA loan that you take to meet a personal expenseA loan you take to meet your home ownership or upkeep needs 
Uses Education, Business expansion, home renovation, wedding, medical emergencies or any other personal requirementBuy, renovate or construct a property – residential as well as commercial
Who can applySalaried and self-employed individuals. SMEs can also apply for a personal loanSalaried and self-employed individuals. 
EligibilityCredit score, age, income and residencyCredit score, age, income,  residency and property ownership
Tax Benefits Offered under Section 24 of the Income Tax ActOffered under Section 24 of the Income Tax Act

While on paper both the loans seem similar, let us look at the advantages of both the loans.

Advantages of a personal loan

  1. Get instant approval of the loan
  2. Use the money to meet medical or other urgent requirements with minimum hassles
  3. Processes are quick and hassle-free
  4. Eligibility is less stringent
  5. Tenures are typically up to five years
  6. The loan amount is usually up to Rs 25 lakhs only

Advantages of a home loan

  1. Interest rates are typically lower than personal loan interest rates
  2. Processes may not be as quick as personal loans, but they are hassle-free
  3. Ownership of property is a must
  4. Tenures are typically up to 30 years
  5. Get higher loan amounts – some lenders may offer loans of up to Rs 5 crores

As is obvious, you can use a personal loan is especially handy when you require access to instant funds. However, home loans offer a longer tenure to pay for a higher loan amount. You can make a choice based on your requirement. But, always use the home loan or personal loan calculator to know the monthly instalment you have to pay for the loan tenure.

Must Read: Tips to Get a Personal Loan Without Income Proofs