What is the Difference between Home Loans and Mortgage Loans?


Understanding the Difference between Home Loans and Mortgage Loans

If you’ve ever wondered about the distinctions between home loans and mortgage loans, this comprehensive article will guide you through the intricacies of these financial concepts. Both home loans and mortgage loans play significant roles in the real estate market, helping individuals achieve their homeownership dreams and secure property investments. In this article, we will delve into the definitions, working mechanisms, and differences between these two loan types.

What is a Home Loan?

A home loan is a financial product offered by banks and governed by the bank code of conduct and the code of banking practice defined by the banking association. These codes ensure the provision of value safeguards and adhere to good banking practices for borrowers. Specifically designed for financing the purchase or construction of residential properties, home loans are instrumental in making homeownership accessible to many.

Home loans are essentially funds lent by a bank to the borrower to facilitate the acquisition of a new home or the construction of one. Once approved, the bank disburses the loan amount, typically into the conveyancing attorney’s trust account after registering the bond at the deed’s office. Unlike mortgage loans, home loans do not require the borrower to offer existing property as collateral.

What is a Mortgage Loan?

Mortgage loans, on the other hand, are secured loans that are tied to real estate properties such as homes, land, vehicles, or even companies. The property acts as collateral for the loan, allowing borrowers to access funds while retaining ownership of the property during the repayment period. This arrangement enables individuals to utilize the property immediately, which would have been challenging if they were required to pay the full property value upfront.

The primary objective of a mortgage loan is to grant borrowers the opportunity to own the property independently once the loan is fully repaid. However, this arrangement also safeguards the lenders, as they can foreclose on the property in case of repeated missed loan payments, thereby mitigating financial losses.

Differences between Home Loans and Mortgage Loans

The distinction between home loans and mortgage loans lies in their purpose and working mechanisms. A mortgage loan is registered as a bond at the deeds office, serving as security for the loan, while a home loan refers to the money lent by the bank to the borrower without the need for collateral registration.

Furthermore, mortgage loans do not impose restrictions on the usage of the loan amount, whereas home loans are specifically intended for the acquisition or construction of residential properties. Both loans are secured advances, making them suitable for financing significant expenses, but they cater to different financial needs.

Applying for either type of loan requires extensive documentation, including job history, asset and liability details, income tax returns, and additional documents for self-employed buyers.


In conclusion, both home loans and mortgage loans are essential components of the financial landscape, facilitating homeownership and property investments. While mortgage loans use property as collateral, home loans do not require this step, making them distinct in their approach. The comprehensive documentation and secured nature of both loan types provide borrowers and lenders with a sense of financial security.

Whether you opt for a mortgage loan to leverage an existing property or a home loan to fulfill your dream of owning a new residential property, both loan options come with their advantages and are recommended for prospective borrowers. Understanding the differences between these two loan types empowers individuals to make informed financial decisions and embark on their journey towards property ownership and financial growth.

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