Land loan vs home loan: difference between land loan and home loan

Land loan vs home loan: loan on value (LTV)

The amount of a loan that you can acquire against a property is called a loan to value (LTV). Because a home loan is linked to the acquisition of residential collateral, the LTV is more important than that of a land loan. For loans of less than 30 lakes, the LTV can be as high as 90%, however, it is limited to 70% on plot loans. So, whether you plan to buy land for personal or investment purposes, you will need to pay a minimum amount of the purchase price.

Mandate

Unlike home loans, home loans have a much longer loan term. Mortgage loans have a maximum term of 30 years3, while land loans have a maximum term of 15 years

Land Loan Vs Housing Loan: Tax Advantages

Land Loan Vs Housing Loan: Tax Advantages

In the case of a mortgage taken out on a fully constructed residential property, applicants can benefit from tax advantages on both interest and principal; however, there are no tax benefits available to home loan applicants. The only possible tax deduction in the case of land is the amount borrowed to build on it.

This is by far the most significant drawback for individuals considering a home loan because, despite being for building a house, you are not eligible for an income tax deduction. income for payments made for repayment. However, if you start construction on the land purchased, you will be entitled to tax benefits on this part of the loan. The portion of the loan that is used to build a house may be deducted from your taxes. Only the year in which the construction activity is completed is eligible for the deduction.

Land loan vs home loan: interest rate

Land loan vs home loan: interest rate

Compared to home loans, home loans have higher interest rates. Home loans are currently available for around 7.50% per annum, while home loans are currently available between 8% and 10% per annum. Mortgage loans are riskier than mortgage loans because banks have collateral that they can resell quickly and recover losses if necessary in the event of mortgage loans.

Difference between land loan and mortgage

Difference between land loan and mortgage

Mortgage loan Land plan / loan
Goal Purchase of real estate or under construction. Purchase of land only for residential use
Fiscal advantages Tax advantages applicable to both principal and interest payments. Tax benefits applicable only to cover construction costs.
Mandate Up to 30 years Up to 15 years
Ready to value Varies between 75 to 90% Varies between 70 to 80%
Conclusion

Conclusion

Despite the variations between home and land loans, the application process and loan interest rates remain the same. Both a home loan and a land loan have their advantages, but the best strategy is to choose one based on your requirements and repayment capacity. Whether you are applying for a home loan or a land loan, your credit score plays a crucial role in the process.

Understanding the purpose and characteristics of a home loan and home loan can help you decide which one is best suited to your needs, whether you are looking for a ready-to-move-in residential unit or a unit that will be built to your specifications. later.


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