What is the Difference Between a Mortgage and a Loan

These are the types of loans that are totally assured with private property. Mortgage are entirely secured loan that are particularly tied to personal private property, such as land, house, farm etc. The resources are owned by the borrower in exchange for money that is paid in installments in the time frame that are set according to the mortgage policies.

Mortgage VS a Loan

What is Mortgage?

In this loan types the borrower give the document of the property to the money donor and receive the money according to the principle of the mortgage. In this case the one party is donor that gives the money and the other part is borrower that accepted the mortgage.

Difference between a mortgage and a loan

Types of Mortgage

  • Fixed-rate mortgages
  • FHA mortgage loans
  • Adjustable rate mortgages
  • VA loan mortgages
  • Interest-only mortgages
  • Reverse mortgages

What is Loan?

It is also a type of loan in which the bond built between a lender and borrower. The lender also called creditor and the borrower called debtor. The money provide and received in this agreement is known as a loan. The initially borrowed money is called the principal.

The mortgage loan is also included in loan types. But both are different because in mortgage there is some security like documents of borrower property etc, but in loan there in so need for any security.

Types of loan

  • Open-end
  • closed-end loans
  • Unsecured
  • secured loans
  • student loans
  • mortgage loans
  • Payday loans

Advantages of a mortgage

It makes home ownership affordable:

Buying a home is probable to be the major purchase that you will ever make and a mortgage will be your largest liability. Because you can extend the repayments on your home loan over so many years, the amount you will pay back every month is more convenient and affordable for the borrower.

It is a very effective way of borrowing:

Interest rates on mortgages loan tend to be lesser than other kind of borrowing because the loan is safe against your property.  This means the bank or building society has the security that if it all goes wrong and you can’t repay it there is still something important your property to sell to return some, if not all of the mortgage.

Disadvantages of a mortgage

  • You will pay back A LOT MORE than you originally borrowed:
  • Watch out for fees.
  • Advantages of loan
  • Purchase without any liquidity
  • Driver of growth
  • Provides capitals for operations
  • Better interest rate
  • Flexibility
  • Accounting and tax advantages
  • Ownership remain with borrower
  • Cash discount
  • Disadvantages of loan
  • Additional burden of cost of goods
  • Security needs  and creditworthiness
  • Partial funding requirements
  • Strict repayments schedule
  • Prepayments penalties and charges
  • Interest rate risk
  • Proceeding fee
  • Increased compliances


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