The difference between a home loan and a mortgage loan against property is portrayed from their names. However, people often get confused with the function of both. The word “mortgage” is associated with an agreement based on any lending institution or bank that lends money on interest. The agreement is signed against the debtor’s property. 

Hypothecation, pledge, and the mortgage are various terms that are used for the charges on assets that are given by the borrower to the lender. A home loan is paid to the borrower in advance to buy a flat or house. A home loan is identified as a secured loan and the property that is purchased by the borrower is held as collateral by the lender throughout the term of the loan.

What is a home loan?

A home loan is a loan that you take to purchase a property under construction, the plot of land, or a read-to-move-in house. A home loan is a secured loan provided by housing finance companies or banks. The buyer has to pay the down payment of the property and then he can avail the home loan. 

There are two types of interest rates charged by the lender. One is fixed and the other is floating. The homebuyer has to repay the loan amount through EMIs. The lender remains the owner of the property until the borrower finishes paying the EMIs. After the EMIs are completed, the ownership of the property formally is transferred to the borrower. You can also visit for a guide to construction loans.

What is a mortgage loan?

Both mortgage and home loans are secured loans and this creates major confusion. In a mortgage loan, the borrower pledges his self-owned property to get a loan for a specific amount of money that is equal to a certain percentage of the value of the property. The borrower needs to handover the documents of the property to the mortgage assist. 

The document remains with the lender until the borrower can repay the loan taken. The loan amount can be repaid in EMIs, which is comprised of the principal amount as well the interest rate. If the borrower is not able to repay the loan on time, the lender can auction the pledged property and recover the amount lent. Here it should also be noted that refinance a mortgage is also an option where the new lender will pay off your old mortgage and you will have a new loan to repay.

Home loan vs. mortgage loan

Here are some of the significant differences, which would help you distinguish between the two:

• Interest rate – The interest rate of a mortgage loan is slightly higher than the home loan. As the chances of defaulting are higher on mortgage loans, they charge a higher rate of interest.

• Purpose – Home loans are availed for buying a plot, property, or home. Mortgage loans are taken against the existing property and they are availed for various reasons like business expansion, children’s education, or wedding.

• Tenure – Home loans are available for tenures of 20-30 years. The mortgage loans are available for a maximum duration of 15 years.

Home loans offer tax exemptions under various sections of the Income Tax Act. Both the loan types are different from each other. A mortgage loan is also a type of home loan with a set of rules and regulations.