Mortgage Loan (also known as loan against property) and Home Equity Loan are both loans you can take from a lender using your property as a collateral. Both these loans can be taken against a residential or commercial property, and the funds you avail from either can be used for reasons ranging from your child’s education, to cover wedding expense, medical bills, etc. Let’s look at the difference between both a little more closely.
Mortgage loan: A mortage or loan against property (LAP) is a secured loan offered by bank and Housing Finance Companies (HFCs) against the borrower’s property (residential or commercial). Know everything to know about Loan Against Property (LAP)
Home Equity Loan: Also known as equity loan or second mortgage, a home equity loan is availed against the borrower’s equity in the property. This is only available on full constructed freehold properties. The borrower’s equity in the house serves as collateral for the lender.
| Features | Mortgage Loan | Home Equity Loan |
| Difference by Definition | A mortgage loan is taken against the current market value of the property. | A home equity loan is taken against the borrower’s equity in the property, i.e., the difference between the property’s current market value and loan outstanding on it. |
| Maximum Loan Term | 15 to 20 years, depending on the lender | 15 years |
| Loan Amount | Up to 80% of property value or up to Rs.10 crores | Up to 75-80% of your equity in the house |
| Type of Interest | Fixed or Floating | Fixed or Home Equity Line of Credit (HELOC) |
| Rate of Interest | Lower than home equity loan | Lower than personal loan |
| Prepayment charges | Not applicable on loan sanctioned at a floating interest rate | Depends on the lender |
| Processing Time | Up to 10 days, depending on document clearance and verifications | 2-4 weeks, depending on document clearance and verifications |
| Tax Benefits | Applicable | Not Applicable |
| Property Type | Available against properties (residential and commercial) under construction | Available against fully constructed freehold properties (residential and commercial) with clear title |
Types of Mortgage Loan
Regular mortgage loan: Also known as a term loan, under this a borrower can avail a lump sum amount at a floating rate.
Overdraft facility: Under this, the borrower can deposit surplus money into the account and enjoy a reduction in interest.
Top-up loan: This allows an existing borrower to avail of extra funds after repaying regularly for a certain period of time.
Types of Home Equity Loan
Fixed Rate Loan: Under this, a borrower can avail of a high loan amount at an agreed interest rate and repay it over a defined tenure.
Home Equity Line of Credit (HELOC): This allows the borrower to withdraw funds as and when they need it through an issued credit card or cheque book.
Want to know if you are eligible for a Mortgage Loan or Home Equity Loan? Connect with a Fincity expert at xyz@fincity.com and have them help you out. We can help you get the lowest-rate loans and offer free assistance up until the loan amount is disbursed.
Explore the Lowest-Rate Loans