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Home loans and mortgage loans are two different products, yet people think they are the same. Read on to know the differences between the two
Borrowers can avail many different types of loans. While loans such as auto loans and personal loans are distinct in their use, borrowers often get confused between a home loan and a mortgage loan. Many feel that they are the same: a misconception that may lead to problems down the line.
Borrowers understand the differences between the two to prevent this mistake. Read on to clear up the key differences between a home loan and a mortgage loan.
What is a home loan?
You can use a home loan to obtain funds from a bank to purchase or build property. You can also utilise a home loan to modify your current home or purchase new land. Home loans are secured loans, which means that the lender uses the house as security for the loan. If the borrower fails to pay back the loan, the bank has the authority to sell it to recoup their money.
Differences between a mortgage and home loan
Some points of difference between a home loan and a mortgage loan include:
Use
While a home loan can only be used to finance the acquisition or construction of a home, a mortgage loan can be utilised to meet a variety of financial needs, including education, wedding, and medical emergencies.
Loan-to-value ratio
A home loan can cover 80-90% of a property's current market value, whereas a mortgage loan can only cover 75% of a property's value.
Interest rate
Another difference between mortgage loans and home loans is that home loans have lower interest rates than mortgage loans. Metra Trust offers mortgage loans starting from 7.5%, but home loans begin from 6.5%.
Processing fees
A home loan’s processing charge varies from 0.2-1% of the loan amount. However, mortgage loan processing fees are still higher. Lenders charge a processing fee of roughly 1.5% of the loan amount.
Loan tenure
A home loan offers a long payback tenure, which can sometimes go up to 30 years. Mortgage loans typically have a payback period of up to 15 years.
While differences exist between home loans and mortgage loans, they serve different purposes. Each of them is unique and fit different situations.
A home loan is a great tool when you want to buy a house, but a mortgage loan works better when you need urgent cash. Both loans are equally accessible, with leading banks, including Metra Trust, offering them to eligible borrowers.
Metra Trust additionally has competitive interest rates and a seamless instant loan app to help you quickly get a loan. You can also customise your loan using the Metra Trust home loan calculator available on the mobile banking app. You can select the tenure, loan amount, and interest rate to gauge the approximate EMI you will need to pay. It can help you plan your finances better before taking a loan.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.