Home Loan

Home Loan vs Loan Against Property


Do you like to live in a lovely home with your family? Do you still feel perplexed by the many home loan available to you? Do you want to learn more about home loan and loan against property? If this is the case, you have come to the right place.

  • A home loan is a mortgage in which consumers borrow money from banks to purchase their primary residence. It might also be used to construct a home from the ground up.
  • A loan against property is one in which the borrower uses their property as collateral to get funds for personal purposes.

What exactly is a home loan?

A home loan may be used to purchase an existing house or to put down a deposit on a new one. Home equity loans may be utilized for either commercial or residential real estate. On the other hand, a secured loan is often utilized to assist a firm in obtaining more funds. There are two methods to get a loan against real estate.

The transaction may be as simple as a home loan, in which case the borrower would get a lump amount secured by real estate. A credit line may also be configured as a high-limit overdraft facility. This restriction would be determined by considering the borrower’s financial status as well as the market value of the property.

What is a loan against property?

Taking out a loan against property is acceptable for personal reasons such as paying for your schooling or a wedding in your immediate family. If you cannot get a typical mortgage for whatever reason, such as a title error, you may borrow against the value of your house to purchase another piece of property.

It might be a house or a company when utilizing the value of the real estate as collateral for a loan. A house mortgage loan guarantees the lender on the property, but a loan against property guarantees the lender on another piece of real estate.

The basic difference between home loan and loan against property

A home loan is used to purchase a completed home, a property currently under construction, or a plot of land on which a home will be constructed in the future. You may be required to submit a down payment when applying for this kind of loan.

This is because home loan is a secured loan from entities such as banks or home financing businesses. To repay the loan, the buyer makes recurring payments to the lender. The interest rate on a loan may be constant or variable, depending on the lender. The borrower will legally own the house after all the EMI payments have been made. However, the lender will remain the formal owner of the home. If the borrower fails to pay the EMIs, the lender may auction off the asset to recoup any lost funds.

In common parlance, a loan secured by real estate is referred to as a “ loan against property.” A borrower’s existing real estate may be used as collateral for a loan of up to a specific percentage of the property’s current market value. Because he must provide the lender with the deed to the property while repaying the loan, he often repays it in EMIs, much like a mortgage. The lender may sell the collateral if a borrower fails to repay a debt.

Rate of Interest

The annual interest rate is one significant difference. Secured loans, such as home loan, can have higher interest rates than unsecured loans. This is often the case because banks and other lenders assume that loans that aren’t secured by anything tangible are more likely to be defaulted on by the borrower. The government and the RBI also work hard to maintain housing expenses within reach of everyone. For example, they work hard to reduce mortgage costs.


Home loan can only be used for a few items, although they are often used to purchase homes, land, and real estate that has already been constructed on. On the other hand, a loan against property may be used for everything from expanding a company to funding a child’s college education. You may utilize the funds from this loan for whichever purpose you see fit. Collateralizing your land asset secures your LAP.

Loan-to-Value (LTV) Ratio: home loan may occasionally provide access to up to 90% of the value of the property being used as collateral. However, most typical loan against property only provides access to 60%-80% of the property’s worth.


Most of the time, a mortgage provides a longer loan term than a LAP. Most loan against property span twenty years, while some lenders provide loans with maturities as long as thirty years. However, the maximum loan period for most collateral-backed loans is 15 years, which is still a considerable time.

Optional fill-in

Most home loans provide for additional funds or a “top-up,” if necessary. As a result, you will have more flexibility in your life and be able to employ the same kind of loan for various financial demands. Depending on your research, certain banks and lending institutions may be able to provide you with a comparable service, although this is not normally included in a mortgage loan.

Documentation process

You may acquire a house loan in as short as 15 days if you have all the papers. Generally, a home loan takes longer as lenders require time to appraise the property and gather and verify the information.

Tax benefits

That one loan may assist you in saving money on taxes may be the most significant distinction between the two. On the other hand, loan against property may provide tax savings in the form of Section 24 deductions for mortgage interest paid and Section 80C deductions for the actual principal borrowed.


So, if all you want to do is purchase a property, a home loan is the best option. Loan against property is the best approach to get funds for company growth or other uses. A loan with payment is the quickest method to receive cash. To choose the greatest solution, one must first determine what one desire. If you need additional information or assistance, please get in touch with Piramal Finance.