If you’re planning to buy a house or need funds against property in 2025, you might come across the terms “home loan” and “mortgage loan.” While they sound similar, they serve different purposes. Confusing one for the other could lead to the wrong loan type, affecting your financial goals.
In this article, we’ll explain the key differences between a home loan and a mortgage, their features, benefits, and how to choose the right one for your needs.
🧾 What is a Home Loan?
A home loan is a loan taken to purchase or construct a residential property. You borrow money from a bank or financial institution, and in return, you agree to repay it in EMIs (Equated Monthly Installments) over a set period (usually 10–30 years).
Purpose:
- Buy a new or resale home
- Build a new house
- Buy a plot and construct a home
- Renovate or extend an existing house
Example:
If you want to buy a ₹50 lakh apartment, and you have ₹10 lakh saved, you can take a home loan of ₹40 lakh from a bank at an interest rate of 8.5% for 20 years.
🧾 What is a Mortgage Loan?
A mortgage loan, also called a loan against property (LAP) in India, is a type of secured loan where you use an existing property (residential or commercial) as collateral to borrow money.
Purpose:
- Business expansion
- Medical emergency
- Wedding expenses
- Education or travel
- Debt consolidation
Example:
If you own a fully paid property worth ₹80 lakh, you can mortgage it to get a loan of up to 60% of the property’s value, i.e., around ₹48 lakh, to meet personal or business financial needs.
🆚 Key Differences: Home Loan vs. Mortgage Loan
Here’s a detailed comparison table to help you understand:
| Feature | Home Loan | Mortgage Loan (LAP) |
|---|---|---|
| Purpose | To buy/build a home | To raise funds using existing property |
| Collateral | The new house you’re buying | An already-owned property |
| Loan Amount | Up to 75%-90% of property value | Up to 60%-70% of property value |
| Interest Rate | Lower (8.35% – 10.00% in 2025) | Higher (9.50% – 13.50% in 2025) |
| Tenure | Up to 30 years | Up to 15 years |
| Tax Benefits | Yes (on principal and interest under 80C & 24B) | No major tax benefits |
| Processing Time | Fast (due to higher demand) | Slightly longer |
| End Use Restriction | Must be used only for property-related needs | Can be used for any legal purpose |
| Ownership Status | Property is under construction/purchase | Property is already owned |
💰 Interest Rates in 2025
Here’s a look at typical interest rates in India:
| Loan Type | Interest Rate Range |
|---|---|
| Home Loan | 8.35% – 10.00% p.a. |
| Mortgage Loan (LAP) | 9.50% – 13.50% p.a. |
Note: Rates vary by lender, applicant’s credit score, and property location.
🏦 Top Banks Offering Home Loans & Mortgage Loans in 2025
✅ Home Loan Providers:
- SBI Home Loan: Starts from 8.40% p.a.
- HDFC Ltd: Starts from 8.50% p.a.
- ICICI Bank: Starting from 8.60% p.a.
- LIC Housing Finance: Starts from 8.45% p.a.
✅ Mortgage Loan Providers (LAP):
- Bajaj Finserv: From 9.75% p.a.
- Kotak Mahindra Bank: From 10.00% p.a.
- Tata Capital: From 10.25% p.a.
- Axis Bank: From 9.85% p.a.
💡 Tax Benefits
🏠 Home Loan Tax Deductions:
- Section 80C: Up to ₹1.5 lakh on principal repayment
- Section 24B: Up to ₹2 lakh on interest paid
- Section 80EEA: Additional ₹1.5 lakh (for first-time buyers)
🧾 Mortgage Loans (LAP):
- Generally, no tax benefit unless used for business, where interest may be treated as business expense.
📌 Pros & Cons of Each Loan Type
🏠 Home Loan – Pros:
- Lower interest rate
- Tax benefits
- Long repayment tenure
- Helps you own a home
Cons:
- End use restricted to housing
- Down payment required
- Pre-EMI interest during construction phase
🧾 Mortgage Loan (LAP) – Pros:
- Use for any purpose (personal/business)
- Large loan amount if property value is high
- No need to sell your asset
Cons:
- Higher interest rate
- No tax benefit (in most cases)
- Risk of losing your property if you default
🤔 Which Loan Should You Choose?
Here’s a quick guide:
| Your Need | Best Loan Type |
|---|---|
| Buying a new house | Home Loan |
| Constructing a home | Home Loan |
| Renovating your house | Home Loan (home improvement loan) |
| Expanding your business | Mortgage Loan |
| Paying for medical or education | Mortgage Loan |
| Need funds urgently | Mortgage Loan (if you own property) |
📝 Final Thoughts
Both home loans and mortgage loans have their unique purposes. A home loan helps you buy or build a dream house, while a mortgage loan helps you unlock the value of your existing property to fund other needs.
Choose a home loan if you’re planning to purchase a new home and want tax benefits with lower interest.
Choose a mortgage loan if you need a large sum for non-housing purposes and already own property.
No matter which loan you choose in 2025, always:
- Compare offers from multiple lenders
- Check your credit score
- Read the fine print on foreclosure, processing fees, and penalties
🙋 Frequently Asked Questions (FAQs)
❓ Can I take both a home loan and a mortgage loan?
Yes, if you meet the eligibility criteria and have separate properties, you can take both types of loans.
❓ Is a mortgage loan better than a personal loan?
If you own property, mortgage loans offer higher amounts at lower interest compared to personal loans.
❓ What happens if I default on a mortgage loan?
The lender can seize and auction your property used as collateral. Always borrow within your repayment capacity.