Difference Between a Home Loan and a Loan Against Property
An individual home loan is a high-value loan. Additionally, it requires the buyer to become familiar with several financial jargons. As a result, the home buyer may feel a bit lost with all of the terminologies associated with the loan. A Home Loan in Varanasi and a loan against property are two different things, but most buyers confuse them. Here are the meanings of the two terms and the differences between these similar-sounding loans.
Home loan: What is it?
In essence, a home loan is a loan you take out to purchase a house that's ready to move in or a building site where you intend to build a house. A bank or mortgage lender will offer this type of Home Loan in Azamgarh and the buyer must put up some money. Lenders charge a fixed or floating interest rate on the loans, which return as EMIs. The lender maintains property ownership until the borrower pays off the EMIs, after which the borrower receives ownership of the property. When a borrower fails to make EMI payments, the lender may auction it off to recover losses.
Describe the loan against the property
There is no easy way to distinguish between a home loan and a loan against your property because both are secured loans. There are no similarities other than that. The loan against property is essentially a mortgage loan. Those who borrow can pledge their existing, self-owned property in exchange for a certain percentage of the property's value. The owner must surrender his loan documents to the lender until the loan is repaid. The loan can be repaid in equal monthly payments comprising the principal loan amount and interest rate. Borrowers who default on loan repayment can have their pledged property auctioned off by lenders to recover the amount of the Home Loan in Ballia.
Home loans versus loans against property
Interest rate:
The interest rate for a loan against property is usually slightly higher than that on a home loan. Mortgage loans have a higher chance of defaulting than regular home loans. Moreover, home loans come with lower interest rates due to the Government of India’s ‘affordable housing for all initiative. Generally, the interest rate for a home loan starts at 8.70%.
Purpose:
A Home Loan in Basti and a loan against property are fundamentally different in the purpose of the loan. Most home loan products enable borrowers to buy a house, land, or a building under construction. In contrast, a property loan allows you to mortgage your existing property to borrow funds for personal reasons such as business expansion, funding your kid's education, funding a wedding, and so on.
Loan to value ratio:
A person can get up to 90% financing on a house when they take out a loan. However, the maximum loan amount sanctioned in the case of a mortgage loan is 60% of the property valuation after the lender evaluates the property.
Duration of the loan:
A loan against property has another significant difference from a home loan. Home Loan in Chandauli typically comes with a repayment period of 20 to 30 years, while loans against property have a maximum tenure of 15 years.
Income tax exemption:
Although you cannot avail of any tax exemption on loans against property, several provisions allow for home loan tax exemptions under Section 80C and Section 24 of the Income Tax Act.
It is clear from the above comparison that home loans and loans against property are not the same things. Home loans are a type of loan against property, but they come with their own unique rules and regulations. In any case, both types of loans are fairly easy to get.