The most basic question that people in India are always
confused about is the difference between Mortgage Loan and loan against
Property. Are they the same, or does there is any difference between the two?
The answer is yes. There is a slight difference between
Mortgage Loan and loan against Property. Mortgage Loan refers to a giving a
security land or home as a deposit to the loan provider, who in turns adds some
interest to it, and when you pay back that amount plus interest, your
collateral legal documents is given back to you.
The same procedure goes with Loan against Property, but in
this case you can lend any type of property such as residential, commercial or
agricultural land for getting cash in exchange. Most of the time, it is seen
that the cash you get in exchange of Property is only 70-75% of actual value of
the collateral. This surely increases the overhead on the customer to pay loan,
since the deal is costlier to loan takers.
The difference is, Mortgage Loan is only availed in case of purchasing
homes. It can be used as an alternative to home loans. A down payment can be
done using the mortgage, and remaining amount can be thought of as a Home Loan.
On the contrary, Loan against Property can be availed for any purpose, not
necessarily taking home. It can be used as secured loans with low interest
rates for any personal requirements.
Hence, always make a note of how much property value cash
you are getting in exchange of Mortgage Loan or Loan against Property in India.
