Home loans are specifically meant for buying or building a residential property. A mortgage is a loan that you can use for anything.
Both are used as a way to get money that will cover large expenses. But a home loan is specifically only for the construction of a new house or the purchase of a property that is ready for you to move into. You can get a home loan for up to 90% of the property’s value. As compared to mortgage loans, the interest rate for home loans is low, and the processing fee is usually between 0.8% to 1.2% of the loan value. You’re allowed up to 30 years to repay a home loan.
On the other hand, there are no restrictions on how a mortgage loan can be used. You can use it for any personal or business requirements. You can get a mortgage for up to 60% or 70% of the property’s market value. The interest rates for mortgages are usually 1% to 3% higher than those for home loans, and the processing fee is generally 1.5% of the loan value. You typically have up to 15 years to repay the mortgage.
Loan amount: Buying a home is likely to be the biggest expense you will undertake. A home loan is designed to let you take on a larger loan for the same value of the security as that for a mortgage.
Interest: The government aims to make homes affordable for everyone. That’s why the interest rates on home loans are quite affordable. The requirements for home loans are also lower.
Term: Home loans and mortgages both have long repayment terms. Home loan terms can be up to 30 years, whereas that for mortgages can be up to 15 years. You may also be allowed to make partial or full prepayments to reduce the term or your monthly payment.
Tax credit: Check federal and state laws to see if your loan allows you any tax credits in order to reduce the burden of debt.
Prepayment: Before signing up, ensure that your contract does not include prepayment charges. In case your finances improve, you should be allowed to go debt-free.