Is a Property Loan the Same as a Home Loan?

Many people do not understand the difference between a home loan and a property loan and get confused.

Sometimes, according to their convenience and without understanding its importance, they give the conditions of one loan in place of the other, whereas there is a huge difference between both types of loans.

Understand the Difference Between a Home Loan and a Property Loan

There is no doubt that a home loan is taken for a ready-made house or for a house that has been completed. It means a home loan is taken for the construction of a house or for the purchase of a ready-made house.

The main difference between a home loan and a property loan is that there is no income tax exemption on a property loan, while a home loan is exempt.

For example, income tax exemption is available on the amount of up to Rs 1.5 lakh deposited towards the principal amount of the home loan. Similarly, there is income tax exemption on interest up to Rs. 2 lakhs taken on a home loan.

On the other hand, there is no income tax exemption on property loans. Yes, businessmen can claim exemption from income tax under other provisions of income tax.

A property loan can be taken for any purpose, whereas a home loan can only be taken for the construction of a house or the purchase of a ready-made house.

In other words, you can take a property loan against the mortgage of your property for the higher education of your children, expansion of your business, marriage, or treatment of an accidental illness.

Property loan is disbursed to the individual, whereas home loan can be disbursed to the builder or the seller selling the house, as the case may be.

In both cases, the bank and the financial institution that gives the loan do a thorough investigation of all the documents on which the loan is based. These institutions also ask questions regarding the documents before lending.

There is also a similarity in both cases in that, in case of inability to repay the loan, the bank has the right to sell the property on which the loan has been given or on which the loan has been mortgaged.

More documents have to be given for the home loan. There is also a difference in the rates of interest. The interest rates on home loans are low, while the interest rates on property loans are high.

There are competitive lending bodies in the market. In conclusion, home loans are taken for the creation of wealth.

On the other hand, a property loan is taken against a property that is already built. Very few people take loans against property because they do not want their property to be sold for any reason.

That’s why people often opt for a personal loan or gold loan instead of mortgaging their property when the need arises.