In the world of real estate and finance, the terms home loan and mortgage loan are often used interchangeably. This confusion is understandable—but it's crucial to know that they represent two distinct financial products with different purposes, eligibility criteria, and implications. Whether you’re a first-time buyer, planning to renovate your home, or need funds for personal goals, understanding the distinction between home loans and mortgage loans can help you make an informed decision.
Let’s explore what sets these two apart.
A home loan is a secured loan provided by banks or NBFCs for purchasing, constructing, renovating, or extending a residential property. The property itself acts as the collateral until the loan is fully repaid.
Buying a house or apartment
Purchasing a residential plot
Constructing a home on owned land
Renovating or extending an existing property
With institutions like Axis Bank or Bank of Baroda, home loans can start from ₹3 lakh and offer competitive interest rates based on your credit score. You can choose between fixed or floating interest rates, depending on your risk appetite and market conditions.
A mortgage loan, also known as a loan against property, is a secured loan where a borrower pledges a residential, commercial, or industrial property to avail funds for non-speculative purposes. These include business expansion, education, medical expenses, or debt consolidation.
Applicable to both residential and commercial properties
The property remains in the borrower’s possession
Loan amounts usually start from ₹5 lakh
Can be used for a variety of personal or business needs
Banks offer both fixed-rate and adjustable-rate options for mortgage loans. The value of the property determines the maximum loan amount sanctioned.
A Loan Against Property is a type of secured loan where an individual borrows money by pledging their existing residential, commercial, or industrial property.
Purpose: You can use the loan amount for any purpose — business expansion, education, medical expenses, or personal use.
Security: Your owned property (not necessarily mortgaged for buying another property) is used as collateral.
Loan Amount: Based on the current market value of the property.
Interest Rate: Generally higher than mortgage loans but lower than personal loans.
Loan Tenure: Typically shorter than home loans and mortgage loans.
| Feature | Home Loan | Mortgage Loan (Loan Against Property) |
|---|---|---|
| Purpose | Purchase/construction/renovation of residential property | Funding for education, business, medical needs, etc. |
| Property Type | Only residential | Residential, commercial, or industrial |
| Loan-to-Value (LTV) Ratio | Up to 80%-90% of property value | Usually 60%-75% of property value |
| Interest Rate | Lower (linked to repo rate); currently ~8%-9% p.a. | Higher by 1%-3% compared to home loans |
| Loan Tenure | Up to 30 years | Up to 15 years |
| Processing Fee | Lower (0.8%-1.2%) | Higher (1%-1.5%) |
| Repayment Structure | Monthly EMIs over long tenure | Monthly EMIs over shorter tenure |
| Government Subsidy | Eligible under schemes like PMAY | Not eligible for government subsidies |
| Prepayment Charges | Nil for floating rate loans | May apply, especially for fixed rate loans |
| Eligibility Factors | Based on income, credit score, employment, and property type | Includes assessment of property value and borrower’s income source |
| Feature | Home Loan | Mortgage Loan | Loan Against Property |
|---|---|---|---|
| Purpose | To buy a new house/property | To buy another property using existing property | To meet personal or business needs |
| Collateral | New property being purchased | Existing property | Existing property |
| Usage Restriction | Only for property purchase | Property purchase | No restriction |
| Interest Rate | Moderate | Usually lowest | Slightly higher |
| Loan Tenure | Long term (10–30 years) | Long term (10–20 years) | Medium term |
| Loan Amount | Higher (up to 80–90% of property) | Based on value of existing property | Based on value of pledged property |
Fixed Rate: The interest rate remains the same for a set period or throughout the loan tenure, offering predictability.
Floating Rate: Interest rates may fluctuate based on market conditions, leading to potential savings or increases.
Pro Tip: For home loans, many banks like Axis Bank and Bank of Baroda offer EMI calculators to help you estimate your monthly payments.
Though both loans require a good credit score and regular income, mortgage loans involve an additional assessment of property value.
Age: 21-60 years (salaried), up to 65 years (self-employed)
Credit score: Preferably 700 or above
Income: Sufficient to meet EMI obligations
Employment: Salaried or self-employed with steady income
Property: Clear title and acceptable to the lender
✅ Lower interest rates
✅ Longer repayment tenure
✅ Government schemes available
❌ Restricted to residential purposes
✅ Flexible use of funds
✅ Leverages existing property for liquidity
❌ Higher interest rates and shorter repayment period
The decision between a home loan and a mortgage loan should be based on your objective. If you're looking to buy or renovate a house, a home loan is ideal due to better interest rates and government support. However, if you need funds for non-housing purposes and have a property to pledge, a mortgage loan offers a flexible funding route.
If you’re buying a new home and don’t already own one, a home loan is your best bet.
If you own a property and want to purchase another, a mortgage loan may offer a better interest rate.
If you need funds for business, personal, or educational purposes, and own a property, then loan against property is more flexible.
Before deciding, always compare interest rates, loan tenure, and usage restrictions, as these factors will impact your overall financial planning. Since interest cost is an expense and not an investment, selecting the right type of loan can help you save money and avoid financial stress.
Make sure to evaluate your income, loan tenure, and repayment capacity before applying. Also, use online tools like EMI calculators and consult with financial advisors or loan officers for tailored advice.