Buying a home is one of the most important decisions you will ever make. It determines where your family lives, what area you live in, and how much home you can afford. But when it comes to buying a home there are many different types of mortgages such as home loans and mortgage loans. Which option is best for you? In this blog post, we’ll discuss the differences between home loans and mortgage loans so that you can decide which one is best for your situation!
1. What is a home loan
First things first, a home loan is a home-secured loan that you can use to finance your home. While the home itself serves as security for this type of home financing, it does have its own eligibility criteria and requirements. A home loan could be in any amount but typically lies between 80 or 90 percent of the property value depending on some factors such as income, employment status, etc.
In case you are planning to buy an under-construction property then banks usually offer loans up to 75% or 70%. However, there might be exceptions with various financial institutions so do check about their current rules and regulations before applying for one.
The interest rates charged by lenders vary from bank to bank and also depend on the following variables:
- a) Loan amount
- b) Loan tenure
- c) Stability of income source
- d) Property’s value and location etc.
Therefore home loans are more expensive than other types of home financing such as a personal loan or an overdraft facility from your bank account by the same amount that you borrow. A homeowner is considered to be at higher risk for defaulting on their repayment obligations compared to those who have invested in other assets so they usually pay more, but there is also another side to this story which we will discuss later. Generally speaking, home loans can carry any interest rates fixed or floating depending upon whether it’s provided by a commercial bank, cooperative banks, or NBFCs (Non-Banking Financial Company). In India only banks including SBI, HDFC, ICICI home loans are popular.
The home loans offered by banks have a tenure of 15-20 years but the maximum time period is 25 years in case you’re planning to buy an under-construction property and it can be extended further upon your request during repayment mode.
2. What is a mortgage loan
Another loan you can get is a home mortgage loan. This home loan is a kind of home financing that allows you to buy your dream home and is suitable for the people who don’t have enough savings on their account because this home loan has lower interest rates than other home loans such as home equity lines of credits (HELOCs) or reverse mortgages.
A mortgage lender will give you the money in exchange for your promise to repay it over time according to terms and conditions laid out by both parties before applying for one. Mortgage lenders usually require borrowers to pay back funds they borrow from them within 30 years but some allow repayment up until 40 years maximum depending upon individual cases whether its creditworthiness which means how likely someone would be able to pay off his/her debts or not.
3. Pros and cons of each type of loan
When it comes to home loans and mortgage loans, a home loan is the better option. First of all, a home loan has lower interest rates than mortgages do; in addition to this home loan does not require as much down payment compared to that required for a mortgage.
One thing about home loans that turns many people away from them is the fact it requires monthly installments over time. This can be somewhat difficult for some individuals who are already having trouble making ends meet because they have so many other expenses each month with no room left for extra costs like these ones. On top of that, if you happen to default on your home payments then when you go back out into the market again there might not even be enough equity held within your to cover any possible future defaults or home loans.
Most home loan lenders will require that you have at least 20% equity in your home before they approve it for a home loan, additionally, most of them would prefer to see 30-40% which is usually not an issue if the house has been paid off and there are no other liens besides mortgages and first time home buyer programs do allow people with less than 20%. Another disadvantage here is depending on the area where one lives they might be able to purchase more expensive homes now due to inflation issues but without even having enough funds saved up yet still need a home so this forces many borrowers into mortgaging their current houses or taking out home equity lines of credit (HELOC) in addition to new mortgage amount required.
4. How to choose between the two loans
There are many home loan lenders who offer home loans and mortgage loans, so it can be really confusing to choose the best option. You should go through certain factors that will help you in choosing between a home loan or a mortgage loan:
– Credit history
– Your profession
– The amount
– Types of home or mortgage
– Home insurance
– Rental home
– Tax benefits
– Mortgage vs. remortgaging
– Down payment
– Loan vs mortgage
– Types of home
– Market value
You should have a good understanding of all these factors and then choose a home loan or mortgage loan. It is also recommended to find reliable loan officers and go through the terms & conditions thoroughly before signing any agreement with home lenders. That way you can get maximum benefits from both home loans as well as mortgages.
5. Best places to apply for either kind of loan
Knowing where to apply for home loans or mortgage is another important factor. There are many companies that offer home and loan services to their customers, so you should choose the best one that would provide an affordable interest rate and whatnot.
The mortgage loan and home loans are both great ways to get a house of your own, but they offer different benefits. You should weigh the pros and cons before deciding which one is best for you. For instance, if you don’t have much in savings or assets to put down as collateral on a home loan, then it might be better than getting a mortgage loan with higher payments that will leave you short on cash at the end of each month.