In the financial world, loans come in many forms to suit different needs. However, a common misconception is that home loans and mortgage loans are the same. When it comes to loans vs mortgage, these terms are often used interchangeably, but they actually refer to two distinct financial products, each with its own purpose, features, and implications. To help you make well-informed decisions about homeownership and your financial goals, let us explore the key differences between mortgage loans and home loans.
What is the difference between mortgage and loan?
A loan is the sum of money borrowed from a financial institution to meet various goals or requirements. It may be collateral-free or secured.
Mortgage refers to an immovable property that is used as collateral to avail a loan. Borrowers can regain complete ownership of the property once they make full repayment of a mortgage loan.
Types of mortgages
When availing a Bajaj Finserv Loan Against Property, you can provide the following types of mortgage:
Commercial Property (both rented and self-owned):
When applying for a Bajaj Finserv Loan Against Property, you can mortgage commercial properties whether they are self-owned or rented out. This includes offices, shops, warehouses, or industrial spaces. Using commercial property as collateral allows businesses and individuals to unlock significant funds for purposes such as business expansion, working capital, or personal needs. Since commercial properties typically have high market value and steady rental income (if rented), lenders often consider them a strong security, making it easier to get higher loan amounts with competitive interest rates and flexible repayment options.
Residential Property (both rented and self-owned):
Bajaj Finserv also accepts residential properties, whether self-occupied or rented, as collateral for a Loan Against Property. This can include apartments, independent houses, or flats. Using a residential property as security enables borrowers to access funds for varied needs like education, medical expenses, or debt consolidation. Even if the property is rented out, the steady rental income enhances the loan eligibility. With competitive interest rates and quick approval processes, leveraging residential property provides a convenient and cost-effective financing option.
What are the features of a loan?
Eligible borrowers can enjoy the following features with the Bajaj Finserv Mortgage Loan.
| Loan amount |
Rs. 10.50 crore* |
| Tenor | 15 years |
| Disbursement time | 72 hours* |
Bajaj Finserv offers nominal mortgage interest rates and charges to make the Loan Against Property more affordable.
Additional Read: What to do if mortgage loan application is rejected?
What are uses of a loan against property?
One major advantages of a property loan is that it comes with no end-usage restriction. You can utilise the funds for a host of purposes.
- Wedding
- Foreign trip
- Medical issues
- Debt consolidation, etc.
- Advertising and marketing
- Working capital
- Renovation of office
- Business expansion, etc.
Now, as you know about mortgage vs loan, assess your requirements and repayment capability. Bajaj Finserv brings various types of Loan Against Property to meet different purposes of borrowers. Ensure to meet the loan against property eligibility criteria and apply for the secured loan online through the application form.
What is the meaning of Mortgage Loan?
Mortgage loan meaning in simple terms is a loan sanctioned against an immovable asset, particularly a house. A mortgage is a transfer of interest of the property from the borrower to the lender and not the ownership itself. Lenders sanction such loans by gaining interest on the property documents until the repayment is complete. The ownership of the house remains with the borrower during this period.
Types of mortgage loans
Below are the types of mortgage loans that are available to borrowers.
- Home Loans
Home loans are provided for the construction or purchase of a property. These loans come with end-usage restrictions and can only be used for the purposes mentioned above.
These loans provide income tax benefits under Section 80C (up to Rs. 1.5 Lakh on the principal) and Section 24(b) (up to Rs. 2 Lakh on the interest paid).
- Loans Against Property
Loans against property are alternative to personal loans. Unlike home loans, a property loan can be used for any purpose.
The mortgage loan process for disbursal can usually stretch for up to 72 hours*. Providing the right documents and fulfilling the eligibility criteria can speed-up the procedure.
What is the difference between home loan and mortgage?
A mortgage loan is a secured loan where you have to mortgage an immovable property as collateral to avail the funds. The documents of the property remain with the lender until the repayment is complete. However, the ownership of the house stays with the borrower.
Home loans are a type of mortgage loan. Hence, the home loan vs mortgage loan argument is not valid.
Home loans
Home loans are available for the purchase or construction of a property. Lenders disburse a specific amount of the property price as the loan. The rest of the funds have to be sponsored by the borrower as down payment.
Loans against property
Loans against property are also mortgage loans. However, they act as personal loans and can be used for any purposes without any end use restriction. Both a home loan and loan against property offer income tax benefits to borrowers under Section 80C and 24(b).
What Is the difference between a personal loan and a mortgage loan?
Some of the distinguishing points between personal loan vs mortgage loan are the following:
1. Collateral
Personal loans are unsecured and collateral-free. Mortgage loans are secured and require the borrower to mortgage a property as collateral.
2. Loan amount
Personal loans provide up to Rs. 25 Lakh while loans against property can offer up to Rs. 10.50 crore*.
3. Tenor
Tenures for personal loans go up to 60 months while that of mortgage loans can stretch up to 15 years.
4. Documents
Among the most distinguishing documents between a personal loan and loan against property is the requirement of property documents. Borrowers have to provide their house documents when availing mortgage loans. These documents stay with the lender until and unless the loan is repaid in full. However, the ownership of the property remains with the borrower during the tenure.
A loan against property can be more beneficial than a personal loan if the borrower requires a higher loan amount or a prolonged repayment period.
Frequently Asked Questions
A mortgage is not the same as a loan. A loan is a financial arrangement where a lender provides funds to a borrower, who agrees to repay the borrowed amount with interest. A mortgage, on the other hand, is a legal agreement used to secure a loan, typically involving real estate as collateral. When taking out a property loan, like a home loan, a mortgage is created to outline the terms and conditions, including the use of the property as security. If the borrower defaults, the lender can take legal action, such as foreclosure, to recover the debt by selling the mortgaged property.
A home loan is a better option for purchasing a property. A home loan provides you with the necessary funds to buy a home, while a mortgage is a legal agreement that secures a loan using the property as collateral. Home loans are the common way to finance property purchases, and they offer various repayment options and tax benefits.
In India, a mortgage loan is used to purchase a property, while a loan against property allows you to borrow money using your property as collateral, without necessarily using it to buy a new property. Mortgage loans are specifically for property purchases, while loans against property offer flexibility for various financial needs.
Debt is a broad term that encompasses all financial obligations, including loans, while a mortgage specifically refers to a legal agreement where property is used as collateral to secure a loan. Mortgages are a type of debt related to property loans.
Many lenders allow prepayment of loans or mortgages without penalties, but terms vary. It’s best to check your loan agreement or contact your lender for specific prepayment rules.
Generally, mortgages tend to have lower interest rates compared to personal loans because they are secured by property, reducing the lender’s risk and offering more favorable terms to borrowers.
No, mortgages aren’t limited to home purchases. They can also be used to refinance existing loans, buy investment properties, or fund other property-related financial needs.
While often used interchangeably, a home loan specifically finances a home purchase, whereas a mortgage is a broader term for any loan secured by property, including home loans.
