Difference between Home Loan and LAP

• Interest Rate: Generally, the rate of interest on a loan against property is higher than that is offered for house loans interest rate. It is because the lenders think there are higher chances of having defaulted on loans against a property compared to home loans. Also, the Union government of India and RBI ensures that the housing finance is affordable resulting in reduced interest rates over home loans.

• Loan to Percentage Value: The loans against property provide up to 60% of the property value as a loan whereas home loans provide loans up to 90% of the property value.

• Loan Tenure: Home loans can be availed up to a maximum of 30 years but a loan against property has only 15 years as the maximum tenure.

• Tax Exemption: One of the notable differences between loans against property and home loans is the tax exemption available. Home loans have a tax benefit under Section 24 and Section 80C of the Income Tax Act for the interest paid on them and the actual principal amount respectively.

• Documentation Process: Compared to loans against property, home loans require around 15 days to be approved and sanctioned. It has a relatively simple documentation process. The loans against property take more processing time since the lenders need to get the property valued. They also check on the borrower’s personal information like address, credit score, etc. for verification.

• Top-Up Option: Most loans against property have the option of a top-up to get additional funding on your existing loan. It will help you meet other financial needs. However, home loans don’t offer such an option usually. Some of the lenders may offer top-up facilities after careful consideration.

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