What is the Difference Between Home Loan and Mortgage Loan
April 02, 2025

We have different types of Home Loans designed to serve different purposes. For example, a home loan is specifically meant for purchase of a new or under construction house or property, while a plot or land loan offers financing for the purchase of a land. That said, aspiring homebuyers often get confused between mortgage loans and Home Loans. Though both the loans are secured loans, there’s a distinct difference between the two.
In this blog, we have decoded the difference between a home loan and mortgage loan so that you can make an informed decision.
Understanding Home Loans
A home loan is a secured loan that offers financing for the purchase of a house or property. You can use the loan amount to buy a new house or an under-construction property. Banks usually sanction loans up to 80% - 85% of the cost of the property, based on your loan eligibility. The tenure is usually up to 20 years. Once you avail a home loan, you are required to repay the loan amount in the form of EMIs (Equated Monthly Instalments). The house acts as a collateral till the entire loan amount is repaid.
Point to note: You can use a home loan only to buy a house and not for anything else.
Understanding Mortgage Loans
Mortgage loans or Loan Against Property is a financing option you can avail against your existing property to cater to various financial requirements, like business expansion, funding for education, etc. It’s a secured loan like personal loan. However, there are no end-use restrictions, meaning you can use the loan amount to meet any financial requirement. The tenure is generally shorter than home loans, often less than 10 years.
Key Differences Between Home Loan vs Mortgage Loan
Now that we've covered the basics of home loans and mortgage loans, let's delve into their key differences.
Aspect | Home Loan | Mortgage Loan |
Purpose | Loan can be used only for purchase of a house or property | Loan can be used to cover any financial requirement |
Security | The house/property you’re planning to buy acts as a collateral | Your existing house acts as a collateral |
Interest Rates | Lower than personal loans | Lower than personal loans but more than home loans |
Loan Amount | Depends on factors like income, credit score, and property value | Depends on property value |
Loan Tenure | Flexible tenure options, typically up to 20 years | Tenure is usually less than 15 years |
Repayment Tenure | No prepayment fees for floating rate home loans | May come with a prepayment and/or part payment fees |
Loan-to-Value Ratio | Typically, up to 85% of the property value | Typically, up to 60% of the property value |
How to Choose Between Home Loan and Mortgage Loan
When it comes to choosing between a mortgage vs home loan, the only parameter you need to consider is your purpose of taking a loan. If you’re planning to buy a new house or property, applying for a home loan would be a better option. Home loans come with lower interest rates and extended repayment tenures.
However, if you have an existing property and want to take a loan against it to meet any financial requirement, a mortgage loan or loan against property would be a better option. There are no end-use restrictions for mortgage loans.
Final Thoughts
Consider the purpose before applying for a loan. While a home loan is specifically designed to purchase a house or property, a loan against property or mortgage loan offers financing that can be used to meet any financial requirement.
Buying a house has never been this easy! Avail Ujjivan SFB’s wide range of affordable home loan products and enjoy a hassle-free loan journey. From house purchase loan to plot loans and home improvement loans, we have it all! Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
FAQs
1. Are mortgage loans more expensive than home loans?
Mortgage loans generally have higher interest rates compared to home loans. Additionally, mortgage loans may have higher processing fees and shorter repayment tenures.
2. Can I transfer my home loan to another bank?
Yes, you can transfer your home loan to another bank through a process known as balance transfer. However, opt for balance transfer only if you’re not satisfied with the current bank’s services.
3. How does the interest rate differ between home loans and mortgage loans?
Both home loans and mortgage loans offer competitive interest rates. However, the specific rates may vary based on factors such as market conditions and borrower profile.
4. Are there any prepayment charges for home loans and mortgage loans?
Banks don’t charge loan foreclosure fee for floating rate loans.
5. Can I use a home loan to purchase commercial property?
Home loans are specifically designed for residential properties. For commercial properties, a mortgage loan is more suitable
6. What is the maximum loan amount I can get for a home loan?
The maximum loan amount depends on your eligibility and the value of the property being financed.
7. Are home loans available for investment properties?
Generally, home loans are meant for purchasing primary residences. For investment properties, mortgage loans provide more flexibility.
8. Can I refinance my home loan into a mortgage loan?
Yes, if you want to leverage your property for financing purposes or refinance an existing loan, a mortgage loan is a suitable option.
9. Do both home loans and mortgage loans offer tax benefits?
Home loans offer tax benefits under section 24(b) and section 80C of the Income Tax Act. Mortgage loan tax benefits may vary depending on the purpose of the loan.
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