There are many banking services that are available to different segments of the population. However, for those who do not understand financial instruments, this is incredibly difficult. It is not surprising that such situations arise when customers, applying for a loan, do not know what the difference between mortgages and loans is. On the one hand, both services are identical. Indeed, in both cases, the borrower has to repay the full amount of the debt with interest. However, the difference may be hidden in conditions. Potential borrowers should know about it.
What is a loan?
It’s worth starting with the definitions. After that, it will be much easier for you to understand what is the difference between a mortgage and a loan. At first glance, it is not obvious, but differences still exist.
So, a loan is a cash loan that a lending institution issues at a certain percentage. In the future, the borrower must pay the debt, as well as interest accrued for the use of funds.
Features
You can apply for a loan at any banking organization, having previously studied the conditions and choosing the most suitable for yourself. At this stage, the potential customer should be especially careful. The conditions in different banks are different.
The peculiarity of the loan is that the issued funds can be used at one’s own discretion, without reporting to the bank for them. Even if you purchase real estate with credit funds, it does not need to be provided as collateral. This means that the client can dispose of this property at its own discretion.
Understanding the difference between a loan and a mortgage will be much easier for you when you become familiar with the second definition.
What is a mortgage?
First of all, it is a type of loan that has a special purpose. The peculiarity of the mortgage is that the funds issued by the bank are intended for the acquisition of real estate. This is why potential customers can count on higher loan amounts and longer repayment periods. In some cases, a mortgage is issued even for thirty years. This reduces the monthly payment for the borrower, but ultimately increases the overpayment. A long repayment term is one of the points that explains the difference between a mortgage and a loan.
Another feature is that, in accordance with the contract, the acquired property must be provided as collateral for the entire loan period. Accordingly, during this period the borrower cannot dispose of real estate.
The Bank by such actions is trying to reduce its own risks regarding non-return of funds. If a situation occurs in which the borrower for some reason ceases to make payments on a mortgage loan, the bank will sell the collateral and use the proceeds to pay off the remaining debt. If the funds remain, they will be paid to the borrower.
The concepts of "mortgage" and "mortgage loan" are identical, there is no difference between them. This is important for potential customers to know.
What is the difference?
A mortgage is a type of loan. Therefore, between these concepts it is impossible to put an equal sign.
Credit, unlike mortgages, has a wider range of conditions. He may demand a bail or ignore this condition. In the case of a mortgage, banks do not provide potential customers with a choice. Collateral is required.
The list of documents that must be provided to obtain a loan is also different. For a loan, it is usually less than for a mortgage.
The difference is in the amount of interest paid. For loans, the overpayment is much higher than for mortgages. That is why the second option is preferable for those who purchase real estate.
The bank provides customers with longer terms for paying mortgages. Typically, a loan is not issued for more than five years. Mortgages can be paid much longer - for thirty years. However, one must understand that in this case the overpayment increases.
The difference between the mortgage and the loan is in the issued amounts. To purchase real estate you can get more money. Unsecured consumer loans are usually highly dependent on the size of the client’s income. As a rule, the credit burden should not exceed fifty percent of income
Applications for a consumer loan are considered faster than a mortgage.
What is more profitable for the bank?
So, the difference between a consumer loan and a mortgage should now become apparent to you. However, the following question arises. What is more profitable? Let's try to figure it out.
It is more profitable for a banking institution to issue a mortgage than a loan. Because in this case, the risks of non-refund are much lower. Indeed, even in the event of insolvency of the borrower, the bank will not incur losses, since it will be possible to sell collateral real estate and in this way pay off the remaining part of the debt.
What is more profitable for the client?
On the part of the potential borrower, the situation may be different. It all depends on what purpose you need to get a loan. If for the acquisition of real estate, then a mortgage has its benefits not only for the bank, but also for the borrower.
It is worth noting that the credit institution involved in the transaction with the property provides the client with some security. Before approval, bank employees must carefully review the documents. After all, the acquired property becomes a guarantee. Accordingly, in the case of non-payment of debt, a credit institution should be able to sell collateral.
The advantage of a mortgage loan for a client also lies in the fact that he receives the right to a tax deduction. However, one must understand that this opportunity is available only to those Russian citizens who have an official salary and in good faith pay personal income tax.
Some borrowers, when receiving a mortgage, can count on the help of the state. You need to know in advance about the availability of programs for young families, government employees, etc. Often, under such programs, banking organizations offer potential customers more favorable interest rates.
Getting a mortgage for the long term, you can not be afraid of rising property prices, as is the case with savings. In addition, if the borrower's income grows gradually, mortgage payments will take away an ever smaller part of his budget and become more and more inconspicuous.
Which is easier?
Despite all the benefits of a mortgage, not all customers can get it. You need to understand that this is a targeted loan. Therefore, the money issued by the bank should be spent exclusively on the acquisition of real estate.
If you need money for other purposes, it’s easier to get a loan than a mortgage. In addition, in the latter case, customers, as a rule, have to collect an impressive package of documents.
Where to get a loan and a mortgage?
For many customers, the answer to this question is a fairly well-known bank in Russia. This credit institution gives the population a huge amount of loans. The percentage of mortgages and loans in Sberbank is often lower and, accordingly, more profitable for the client than in other institutions issuing cash loans.
Experts recommend contacting the bank if thirty to fifty percent of the price of the property is accumulated. However, not everyone has a similar opportunity to collect the necessary amount. That is why potential customers are interested in a mortgage without a down payment at Sberbank. You need to understand that for a credit institution, such conditions are extremely disadvantageous, so it is unlikely that it will approve the application for the full amount.