Home Loan vs. Mortgage Loan: Key Differences You Must Know
A mortgage loan can be defined as a type of loan taken to purchase a home or residential property and that particular home, real estate and property is given as collateral to the lending institution or commercial bank.
The most important tag about this type of loan is the fact that if the borrower does not repay or repeatedly defaults on the installment payment for the loan taken, the said property, home, or real estate can be seized, the proprietorship of the property taken away, and the lending institution becomes the owner of the property to recover the loan advanced against the mortgage. age.
On the other hand, a home loan is a particular type of loan that is usually taken for various property-related purposes like property repair, facelifts, or renovations.
The Modus Operandi of Home Loan Balance Transfer
The home loan balance transfer is the term used to denote the transfer of your existing loan amount to another lending institution or commercial loan (from which you had originally availed the loan).
Usually, you resort to a balance transfer of a home loan to avail favorable terms and conditions, which usually include:
- Reduced rate
- Extended loan repayment period or extension of loan repayment and
- Availing an increase in loan amount.
You can begin the home loan balance transfer process by officially informing the lending agency or commercial bank about your intention to move the home loan to another lender.
The concerned bank or lender from whom you had taken the home loan will issue you an NOC. Here, NOC is a very crucial official document for the whole process of the transfer of the loan. You have to submit this NOC to the new lender. After receiving the NOC and all other loan-related documents, the new lender will grant you a loan specifying rules, terms, and conditions.
How Can You Transfer Your Home Loan?
The home loan transfer is a specific process under which you can go for refinancing or transfer of balance to avail more favorable terms, EMI benefits, and reduced rate of interest.
Before you go for it, you should keep the following points in mind:
- Evaluate the status of the current loan vis-à-vis such factors as loan period, current interest rate, and balance amount of the loan. loan.
- Compare the then-current interest rate with the interest rate to be charged by your new lender.
- Backgrounder study of new lender
- Credibility of the new lender in the market
Importance of Your Credit Score in Availing Home Loan and Mortgage Loan
A good borrower is one who takes a loan, pays the EMIs, and clears the entire loan balance. If you have been paying your EMIs timely, you are rated as a good borrower. This will enable you to have a higher credit score.
The issue of higher credit scores is integrally associated with both home loans and mortgage loans. When you are requesting a bank to have your loan transferred to it from some other commercial bank, the concerned bank will look into your credit score, whether you have been paying EMIs regularly, whether you are in the habit of defaulting on repayments, and the operation of your savings bank account.
You can get a higher credit score only if your transaction process relating to loan repayment is spotlessly clean. A borrower for a home loan or mortgage loan will get first preference if the customer behavior or trend of banking operation is good.
Supposing you are not paying EMIs despite repeated reminders from the lending bank, your credit score will be low. A person with a low credit score may not get the benefit of getting his existing home loan or mortgage loan account transferred to another bank (with full liquidation of the loan amount plus interest to the first lending bank). You should also maintain a good credit score with the new lender so that you keep the door open to availing future loans, if needed.
Conclusion
You should go for the transfer of a home loan or mortgage loan from the bank to the other only when you get extra benefits from the new lender. Such extra benefits usually include lower interest rates, reduced servicing charges like processing fees, and other costs associated with the transfer of the loan. It is quite common that those who have taken a home loan or mortgage loan shift their loan account to some other bank or lending body to avail lower interest rates and easy EMI payment norms.
We, at Kogta Financial, will help you understand everything about home loans and mortgage loans, including their differences, from filing a loan request to submitting the final EMI. Want to know more about home loans and mortgage loans? Visit us today—we’ll be happy to assist you!
Frequently Asked Questions (FAQs)
Answer: This can certainly be useful if the new bank is charging reduced interest rate and also charging lesser amount on processing the new loan. If it is the same, there isame, there is no use in in transferring your loan amount. If you feel you can save some by being charged lower interest by the new lender, you should go for a loan transfer.
Answer: Yes! To prove you are a good borrower and keep open the door for future or fresh loans, a higher credit score is very useful. Lending agencies and banks will not hesitate to advance you loans if your credit score is very good.
Answer: Yes, it is primarily important as the new lender cannot proceed to grant you a loan unless you have furnished the NOC from the previous lender. The NOC is a very valuable document, as it proves you have met all the liabilities of the previous lender, and the new lender may not face any hidden charges.
Answer: In that case, you cannot avail a fresh loan from a new lender. However, there is no question that you will not be issued an NOCC if your payment schedule had been regular and your payment of EMIs continued without reminders from the bank or lending company.
Answer: The loan repayment norms, rules, and regulations are almost the same for all commercial banks and lending institutions. The only variable factors are the rate of interest, collateral norms, and period of repayment of the loan amount. Some banks charge lower interest rates for home loans and mortgage loans. You must consider this factor.
