Most people use the words ‘home loan’ and ‘mortgage’ interchangeably, but it might surprise you to learn that they actually refer to two entirely separate things.
What is a home loan?
A home loan is the sum of money a lender lends you to purchase your chosen property. You then pay this money back to the lender over a number of years, along with interest on the loan calculated at either a variable (fluctuates with the market) or fixed (1 to 10 years) interest rate.
What is a mortgage?
A mortgage is a security measure that’s put in place when you take out your home loan which protects the lender if you default on your loan repayments. If you don’t pay the money back to them, the mortgage gives the lender the legal right to sell your property to recoup their losses. The mortgage stays in force until you have paid off your home loan, after which the property becomes totally yours.
What's the actual difference?
A home loan is a means of buying a home when you don’t have the money yourself, while a mortgage is a means of guaranteeing a loan and protecting the lender from non-payment.
If you’re planning on buying a property, it’s always a good idea to know what terms like these mean. So be sure and talk to our expert team at Tiimely Home any time you aren’t clear on something you read.