The Difference between a Mortgage and a Home Loan
The real estate market in Singapore can be quite intimidating due to the high monetary demands. It also has a high density of population (29th highest in the world) which makes the demand even higher. Therefore, if you are willing to own a house in this coveted but expensive city, it is always great to be educated on the real estate terms to make sure you are taking the best and the most informed decisions. The words “mortgage” and “home loan” gets thrown around a lot in the real estate market, and many people think that they can be used interchangeably, which is not true. Let us give you a basic introduction to both terms, so whenever you home loan rates or mortgage rates in your hunt for your dream home, you will not be confused.
What is a Mortgage?
A mortgage is a certain type of loan that is secured by a certain property – in this instance, the house you are willing to buy. There is an agreement with the borrower to pay back a set amount of money over a period of time, during which they can own the mortgaged property. However, should there be a shortage of payment for more than the period agreed, the property shall be foreclosed upon and the lender of the money takes back the property ownership. It means that the true ownership of the property lies with the lender until the mortgage is fully paid off by the borrower. Usually, mortgages are long-term loans that spans over many years. Therefore, this agreement protects both the borrower and the lender given that one party does not follow the signed agreement.
What is a Home Loan?
A home loan is usually easier to acquire and has a less complex process compared to acquiring a mortgage. Here, the borrower gets the needed amount of money to purchase the property from a bank or a financial institution. It does not have the “deed of trust” that binds the property to the agreement, but rather an agreement that is similar to any other loan that you take from a financial institution. Over the agreed period of time, you will be paying off the principal amount of money taken initially along with an interest for the time you are taking to settle the loan fully.
In conclusion, a mortgage is a secured loan which comes with a strict agreement which is specifically tied to a property that the borrower is willing to purchase. During the term of the mortgage, the borrower owns the property and can use it as they please. However, if a foreclosure happens due to the failure of making the required payment installments, the lender has the authority to evict the borrower and sell the property. Whereas, a home loan is simply a loan taken from a financial institution for the purpose of purchasing a home.