What is the difference between a home loan, a mortgage loan, and a loan against property?

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The terms “home loan,” “mortgage loan,” and “loan against property” are often used interchangeably but they do have distinct differences. Here’s an overview of each type:

### Home Loan
– **Purpose**: A home loan is specifically used to purchase a residential property, such as a house, apartment, or condo.
– **Type of Loan**: It is a secured loan where the property being purchased acts as collateral.
– **Repayment**: Typically has a long repayment tenure, ranging from 15 to 30 years.
– **Interest Rates**: Can be fixed or variable.
– **Eligibility**: Depends on factors like credit score, income, employment history, and the value of the property.

### Mortgage Loan
– **Purpose**: The term “mortgage loan” is often used interchangeably with “home loan,” but it can refer to any loan secured by real estate, including both residential and commercial properties.
– **Type of Loan**: Like home loans, mortgage loans are secured loans with the property acting as collateral.
– **Repayment**: Generally long-term, similar to home loans, but can also include commercial real estate loans.
– **Interest Rates**: Can be fixed or variable.
– **Eligibility**: Similar to home loans, depending on creditworthiness, income, and property value.

### Loan Against Property (LAP)
– **Purpose**: A loan against property is a type of secured loan where an existing property (residential or commercial) is used as collateral to obtain a loan for purposes other than buying property. These purposes can include business expansion, education, medical expenses, or personal needs.
– **Type of Loan**: Secured loan using an owned property as collateral.
– **Repayment**: Typically has shorter tenures compared to home loans, usually ranging from 5 to 15 years.
– **Interest Rates**: Generally higher than home loans and mortgage loans.
– **Eligibility**: Depends on the value of the property, the applicant’s income, and credit score. The property used as collateral must be owned by the applicant.

### Key Differences
1. **Purpose**:
– **Home Loan**: Specifically for purchasing residential property.
– **Mortgage Loan**: Broad term that includes home loans and can also apply to loans for commercial properties.
– **Loan Against Property**: For various personal or business needs using an existing property as collateral.

2. **Collateral**:
– **Home Loan**: The property being purchased is the collateral.
– **Mortgage Loan**: The property being purchased or an existing property can be the collateral.
– **Loan Against Property**: An already owned property is used as collateral.

3. **Loan Tenure**:
– **Home Loan**: Longer tenures (15-30 years).
– **Mortgage Loan**: Similar to home loans but can vary based on property type.
– **Loan Against Property**: Shorter tenures (5-15 years).

4. **Interest Rates**:
– **Home Loan**: Generally lower interest rates.
– **Mortgage Loan**: Similar to home loans, but may vary.
– **Loan Against Property**: Higher interest rates compared to home loans.

5. **Use of Funds**:
– **Home Loan**: Exclusively for purchasing residential property.
– **Mortgage Loan**: Primarily for purchasing property but can include refinancing.
– **Loan Against Property**: Flexible use for personal or business needs.

Understanding these differences can help you choose the right type of loan based on your financial needs and circumstances.