Jun 12, 2023

Mortgage vs. Home Loan in India: Key Differences Explained

by Godrej Properties Limited



Introduction to Mortgage & Home Loan

Definition and Purpose


A mortgage refers to a legal agreement between a borrower and a lender, where the borrower pledges their property as collateral to secure a loan. The lender holds the property's title as security until the loan is fully repaid. 

Home Loan

A home loan, also known as a housing loan, is a financial product provided by banks and financial institutions to help individuals purchase or construct a residential property. 

Financing Purpose


The primary purpose of a mortgage is to provide funds against the value of an existing property. Borrowers can utilise the mortgage amount for various purposes, such as debt consolidation, home renovation, business expansion, or other personal needs.

Home Loan

A home loan is exclusively designed to finance the purchase or construction of a residential property. It enables individuals to fulfil their dream of owning a home by providing the necessary funds to cover the property's purchase price or construction costs.

Collateral and Security


In a mortgage, the property itself serves as collateral or security for the loan. The lender has the right to take legal action and initiate foreclosure proceedings if the borrower fails to repay the loan as per the agreed terms.

Home Loan

A home loan may or may not require collateral, depending on the lender's policies and the loan amount. In some cases, the property being financed serves as collateral, similar to a mortgage. 

Usage and Flexibility


Since a mortgage allows borrowers to access funds for various purposes, the usage is more flexible. Borrowers have the flexibility to allocate the mortgage amount for debt consolidation, business investments, education expenses, or any other financial requirements.

Home Loan

A home loan is specifically tailored for purchasing or constructing a residential property. The loan amount is intended solely to acquire a home, and it cannot be used for other purposes unrelated to the property.

Interest Rates and Repayment Terms


Mortgage interest rates may vary depending on market conditions and the borrower's creditworthiness. Repayment terms can be structured as fixed or floating rates, and the tenure can range from a few years to several decades.

Home Loan

Home loan interest rates also depend on market conditions and the borrower's credit profile. Lenders offer fixed and floating interest rate options, and the loan tenure typically ranges from 10 to 30 years, allowing borrowers to repay the loan in monthly installments.


While both options involve borrowing funds, a mortgage is primarily a loan secured against an existing property, while a home loan is specifically designed to finance the purchase or construction of a residential property. 

Frequently Asked Questions

1.Can a mortgage be used to purchase a property?

Ans: No, a home loan is the appropriate financing option to purchase a property.

2.Are the interest rates higher for mortgages compared to home loans?

Ans:The interest rates for mortgages and home loans vary depending on market conditions and individual factors. 

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