Mortgage vs. mortgage: which one to choose? To find
When it comes to mortgage credit, there are different classifications. Depending on what the borrower wants to do with the home loan money, a separate category of home loan should be chosen.
For example, there is a home loan, a home renovation loan, an extension home loan, an additional home loan, a home loan, a land loan, a construction loan, a mortgage balance transfer, a non-residential mortgage. residential, a commercial real estate loan and a mortgage loan. , among others.
Some of these loans are complementary loans that can be opted for with a principal loan. For example, home loans and mortgages are secured loans that offer additional loan facilities, balance transfer services, etc., depending on the total loan amount for which a borrower is eligible. One can need a loan for various reasons, but with the different home loan products available in the market today, experts say that potential borrowers are easily confused with each other. One of these confusing types of loan is home equity loan and mortgage loan.
While a home loan is used to finance the purchase or construction of a home, a mortgage loan, on the other hand, has no restrictions on how the borrower plans to use the amount. of the loan. Simply put, when buying or building a new home, you have to take out a home loan, whereas a mortgage loan is taken out by a borrower for property they already own.
The two loans may sound similar, but they are very different.
- The real estate loan is only intended for the construction of a new home or the purchase of real estate ready to welcome the borrower.
- With a mortgage, the loan to value ratio is high. The borrower can get a loan of up to 90% of the market value of the property.
- The interest rate for home loans is lower than for mortgages.
- The processing fees for a home loan typically range from 0.8% to 1.2% of the value of the loan.
- The repayment period of a mortgage is one of the longest available to the borrower, up to 30 years.
- With mortgages, the borrower is free to use the money as he wishes. There is no restriction on how the loan money can be used. The borrower can use the money to cover any expenses related to the house or to meet their personal needs.
- Unlike home loans, the loan-to-value ratio of mortgages is relatively low. One can get a loan of up to 60 to 70 percent of the market value of the property under this loan option.
- The interest rate charged on mortgages normally ranges from 1 to 3 percent more than home loans.
- Compared to home loans, mortgage loan processing fees are also higher. Lenders typically charge around 1.5% of the loan value as a processing fee.
- Mortgage repayment terms are generally offered up to 15 years.
- Borrowers also benefit from the top-up facility, in which additional financing can be obtained on existing loans, usually without additional paperwork.