What Distinguishes a Mortgage Loan From a Housing Loan?

Juliet D'cruz

What Distinguishes a Mortgage Loan From a Housing Loan?

Housing Loans and Mortgage Loans are frequently used interchangeably, but they are not the same thing. Despite the fact that Home Loans and Mortgage Loans are two distinct products, many consumers confuse these two. The two products will be discussed in-depth in this article, along with how they differ from one another.

A wide variety of loans are available to borrowers. While loans like Vehicle Loans and Personal Loans have different purposes, customers frequently mix up House Loans with Mortgage Loans. A common misperception that could cause issues later on, is that people believe they are all the same.

To avoid making this error, you must comprehend the distinctions between the two. To understand the main distinctions between a Mortgage Loan and a Home Loan, continue reading.

What is a Home Loan?

With a Home Loan, the borrower receives funding from the bank to either purchase an existing home or build a new one. A Home Loan can be used to buy or construct housing. A Home Loan can be used to remodel your current residence or buy new property. Home Loans are secured loans, meaning the lender holds the house used as security for the loan. It is released once the borrower has paid back the entire loan in equal monthly instalments. The lender has the authority to sell the home to recoup any unpaid debts if the borrower is unable to make loan payments and declares bankruptcy.

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What is a Mortgage Loan?

Mortgage Loans, in contrast to Housing Loans, are available for any use by the borrower. It does, however, have one thing in common with Home Loans—the lender seizes control of the borrower’s property until the loan is fully repaid. A few distinctions between a Mortgage Loan and a Home Loan are as follows:


A Mortgage Loan can cover various expenses, such as education, a wedding, and unexpected medical costs, but a Home Loan can only be used to fund the purchase or building of a home.

Loan-to-value ratio

A Mortgage Loan can only cover 75% of the value of a house, whereas a Home Loan can cover 80–90% of the current market value.

Interest rate

Home Loans have lower interest rates than Mortgage Loans, which is another distinction between the two types of loans. Although Home Loans start at 6.5%, banks offer Mortgage Loans starting at 7.5%.

Processing fees

For Home Loans this fee range from 0.2-1% of the loan amount. Processing costs for Mortgage Loans are still more expensive. Lenders impose a processing fee of about 1.5% of the loan amount.

Loan tenure

A Housing Loan gives a prolonged payback period that occasionally reaches 30 years. Mortgage Loans typically have a 15-year payback duration. While a Home Loan is a fantastic tool for property buyers, a Mortgage Loan is preferable if you require quick cash.

Home Loan vs. Mortgage Loan

The table below compares a Home Loan and a Mortgage Loan on some important criteria.

Parameters Home Loan Mortgage Loan
Purpose  Can be used only to purchase a house or a piece of land There are no restrictions to the usage of such kind of financing. The loan amount may be applied to any purpose by the borrower.
Loan-to-value (LTV) ratio 85-90% of property value 60-70% of property value
Rate of Interest Lower than Mortgage Loans 1-3% higher than Home Loans
Processing Fee 0.8-1.2% of the total loan amount 1.5% of the total loan amount
Loan Tenure Maximum 30 years Maximum 15 years
Tax benefits Available under Section 80C, 24, 80EE,  and 80EEA, Under Section 24

Documents Required

The documentation is essentially the same for both Mortgage Loans and Housing Loan. The list of the paperwork required to apply for a Home Loan or Mortgage Loan in India is as follows:

  • ID Proof: PAN card, Aadhaar card, voter ID card, driving license
  • Address proof: Electricity bill, house tax bill, water bill, passport, or any other ID proof
  • Income proof documents
  • Bank statements
  • Property documents
  • Income tax returns


Get in touch with lending professionals to receive a Housing Loan as soon as possible. To estimate the approximate EMI, you would have to pay. Then, you can choose the loan amount, tenure, and interest rate. 

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