Purpose decides the product
A home loan finances the purchase, construction or improvement of a property, and that property becomes the security. A loan against property is raised on a property you already own, and the funds can be used for a broad range of personal or business needs, subject to the lender’s end-use rules.
How they differ in practice
- End use: a home loan is tied to the property; a loan against property is more flexible
- Funding proportion: lenders typically fund a higher share of value on a home loan than on a loan against property
- Tenure: home loans usually run the longest of any retail product
- Pricing: home loans generally sit at the finer end, given the end use and security
What stays the same
- Both are secured, so the property is at risk on default
- Both need clean title, approvals and a legal and technical assessment
- Both take longer to sanction than unsecured borrowing
- Both are repaid on a reducing-balance EMI
Common situations
- Buying a home: a home loan, in nearly every case
- Funding a business expansion using an owned property: a loan against property
- Consolidating expensive unsecured dues with an owned property: a loan against property, if the total cost genuinely improves
- Building on a plot you own: a construction facility under a home loan, depending on the lender
Frequently asked questions
Can I take a loan against a property that already has a home loan on it?
Sometimes, depending on the outstanding balance, the property’s value and the lender’s policy. It is assessed case by case.
Is the tax treatment the same?
No. Home loans have specific provisions under the Income Tax Act; treatment for a loan against property depends on the end use. Confirm with a tax adviser for your situation.
Which gives a larger amount?
It depends on the property value and your income. As a rule, lenders fund a higher proportion of value on a home loan.