Mortgage loan and housing loan are financial products with similar characteristics in very many aspects. Application procedures or creditworthiness tests are almost identical. However, it should be remembered that the mortgage is not the same as the housing loan. The difference relates primarily to the purpose of financing the funds raised.
Not every mortgage is a housing loan
In the vast majority of cases, real estate is a security for a mortgage and housing loan. A similar situation applies to the use of these financial products, but the mortgage gives much more opportunities in the context of financing. Pursuant to the banking law, a mortgage loan may be intended for the purchase of a single-family house, a flat, a summer house, a garage, or the purchase of a company or communal flat. There is also a possibility to take out a housing loan to transform the tenant’s right to a flat in order to obtain a proprietary right to the flat (applies to cooperative premises). The mortgage loan, in turn, can also be used to finance the construction of a house, renovation of a flat, purchase of a building plot or modernization of premises for rent or lease. Therefore, the mortgage loan gives a much larger scope of possibilities to dispose of the funds obtained from the bank.
Terms and conditions of the loan agreement
Mortgages and home loans are concluded for many years. The differences in interest costs for these products are small, therefore all commissions and hidden fees for additional services have a large impact on the attractiveness of the loan offer. When choosing between a mortgage and a housing loan, it is worth paying particular attention to the amount of bank commission and the cost of applying for a loan. In addition, it may be equally valuable to take advantage of a grace period in case of financial problems. Another factor that should be taken into account is the payment for early repayment of the liability. Most banks return interest costs to borrowers, which in the case of long-term loans can bring significant savings.
The difference between a mortgage loan and a housing loan mainly relates to the purpose for which cash will be allocated. Where they are the same, minimizing costs should be the most important factor in choosing a credit offer.