A home loan and a land loan are both types of loans provided by financial institutions to help individuals purchase property. But a home loan and a land loan are designed for different purposes and come with distinct features. Here’s a breakdown of the differences between a home loan and a land loan:
Home Loan:
A home loan, also known as a housing loan or a mortgage, is specifically designed to help individuals finance the purchase of a residential property, such as a house or an apartment. Here are the key features of a home loan:
Purpose: Home loans are used to purchase fully constructed residential properties, whether new or pre-owned.
Collateral: The property being purchased (the house or apartment) serves as the collateral for the loan. If the borrower defaults on the loan, the lender has the right to seize the property.
Loan Amount: The loan amount typically covers a percentage of the property’s value. The percentage varies, but it’s usually around 75-90% of the property value, depending on the lender’s policies.
Interest Rates: Home loan interest rates are generally lower compared to land loan rates because a built property is seen as a more secure investment for lenders.
Tenure: The tenure of a home loan can extend over a long period, often up to 30 years. It also allows borrowers to repay the loan in smaller EMIs.
Tax Benefits: In many countries, including the U.S. and India, there are tax benefits associated with home loans. The loans, such as deductions on the interest paid.
Land Loan:
A land loan, on the other hand, is intended to help individuals purchase a plot of land for various purposes. Here are the key features of a land loan:
Purpose: Land loans are used to purchase vacant plots of land that may or may not have any construction on them.
Collateral: Since land does not generate income like a constructed property, lenders often view it as a riskier investment. Therefore, the land itself serves as collateral, and interest rates tend to be higher.
The loan amount for land loans is generally lower than that for home loans. And it also covers a smaller percentage of the land’s value.
Interest Rates: Land loan interest rates are typically higher than home loan rates due to the higher risk associated with undeveloped land.
Tenure: The tenure for land loans is usually shorter compared to home loans, ranging from 5 to 15 years.
Tax Benefits: In many cases, tax benefits associated with home loans might not be applicable to land loans, as they are meant for purchasing land rather than a constructed property.
For More Details:
Contact: +91 7094434780
Mail: info@vspromoters.com
Visit: www.vspromoters.in