There are many financial terms that you will come across about home loans and that might leave some of you confused. Many times, most of you get baffled between a loan against property and a home loan because the characteristics and privileges of both loans are somewhat similar. A loan against property is also known as a mortgage loan. Before applying for home loans, use a home loan calculator to check whether you can pay the interest rates and equated monthly instalments. In addition to using the home loan calculator, you should also check home loan rates.
What is Loan Against Property?
A loan against property is a kind of mortgage in which you can use your self-owned property for an amount equal to the mortgaged property’s market value. In the case of a loan against property, you must hand over your property-related documents to the lender until you repay the loan. Similar to home loans, you can repay the loan against the property amount in equated monthly instalments, including the loan amount and the interest rate. If you default and fail to repay the loan on time, the lender can sell your property and recover the loan amount.
What is Home Loan?
Home Loans are loans you take to buy a house where you can move in right after buying the house, an under-construction property, or a plot of land. They have secured loans that banks, housing, and non-banking finance companies offer, and you should make a down payment. Lenders can charge both floating and fixed interest rates, and you should repay the loans in equated monthly instalments.
The lender can own your property until you pay the equated monthly instalments, and once your repayment is made, the lender will transfer the ownership of your property back to you. If you fail to pay the loan or default, the lender can sell your property to recover the loan amount. Hence, before applying for home loans, use a home loan calculator to calculate the interest rate and equated monthly instalments, and remember to check out the home loan rates.
Difference Between Loan Against Property and Home Loan
The difference between a loan against property and a home loan is given below:
Rate of Interest
The interest rates of loans against property are more than the home loan rates because banks and other financial establishments consider the possibility of defaulting on loans against property higher than home loans. On the other hand, the home loan rates are less than the interest rates on loans against property. You can use a home loan calculator to calculate the interest rates and the equated monthly instalments.
Term of Loan
You can avail of a loan against property with a maximum loan term of 15 years, whereas in the case of home loans, the term of home loans is 20 years but might be extended to up to thirty years.
Usage of the Loans
Home loans have restricted uses, and you can use home loans to purchase a plot of land under construction or ready to move in houses and construct a house. On the other hand, loans against property have multiple uses. You can use a loan against property to invest in real estate, get funds to expand your business or fund higher education. Utilising your reals estate property as an assurance, you can opt for a loan against the property.
Home loans need approximately 15 days to get sanctioned by lenders and have an uncomplicated paperwork procedure. On the other hand, loans against property need a long time to get processed because banks and financial establishments require to get the property valued and check the personal details of the applicant
Exemption from Tax
In the case of a loan against property, you can not enjoy tax exemption privilege. On the other hand, in the case of home loans, you can enjoy tax exemption privileges under multiple provisions of the Income Tax like Section 80C and 24.
With the abovementioned differences between loans against property and home loans, you can prioritize your requirements and compare the various home loan rates that every bank, housing, and non-banking finance company offers. In addition to checking the interest rates on home loans, you should also use a home loan calculator to calculate the interest rates and equated monthly instalments and see that you can pay off the loan on time.