Introduction: Why Understanding Mortgage Loan Types Matters
If you own a residential, commercial, or industrial property and are looking to raise funds, understanding what is mortgage loan becomes essential. A mortgage loan allows you to borrow money by pledging your property as collateral—but every mortgage loan is not structured the same way. The type of mortgage loan you choose directly influences your interest rate, eligible loan amount, repayment tenure, prepayment flexibility, and overall financial risk, making the selection critical for long-term planning.
In this guide, we break down the different types of mortgage loans available in India, explain real-world use cases for each, and help you identify which mortgage loan suits your requirement in 2026, whether you need funds for business expansion, construction, balance transfer, or personal financial goals.
What is Mortgage Loan? (Quick Recap)
A mortgage loan is a secured loan where an immovable property is pledged as collateral to raise funds. The lender retains a legal claim on the property until the loan is fully repaid, while ownership and usage remain with the borrower.
Mortgage loans are popular because they offer:
- Lower interest rates
- Higher loan eligibility
- Longer repayment tenure
Classification of Mortgage Loans in India
Mortgage loans can be broadly classified in two ways:
- Based on purpose of the loan
- Based on type of property mortgaged
Let’s look at each category in detail.
Types of Mortgage Loan Based on Purpose
1. Loan Against Property (LAP)
A Loan Against Property is the most common form of mortgage loan in India.
Key features:
- Property pledged: Residential, commercial, or industrial
- End use: Business expansion, working capital, debt consolidation, education, medical needs
- Tenure: Up to 15–25 years
- Interest rates: Lower than unsecured business loans
LAP is ideal for borrowers who want flexibility in how the funds are used. According to HDFC Bank’s guidelines, LAP offers competitive rates for both salaried and self-employed individuals.
2. Commercial Mortgage Loan
A commercial mortgage loan is designed specifically for business purposes using commercial property as collateral.
Typical uses include:
- Office expansion
- Retail outlet funding
- Warehouse development
- Commercial property purchase
These loans often come with higher ticket sizes but slightly higher rates than residential mortgages due to commercial risk. RBI guidelines ensure transparency in commercial lending practices.
3. Residential Mortgage Loan (Non-Home Loan)
This type of mortgage involves pledging a residential property you already own to raise funds for non-housing purposes.
Common use cases:
- Business capital
- Personal financial needs
- Education or overseas studies
It is different from a home loan, as the property is not being purchased—it is being used as security. ICICI Bank offers competitive rates for such mortgages.
4. Mortgage Loan for Business
A mortgage loan for business is tailored for self-employed individuals, MSMEs, and companies.
Why businesses prefer this:
- Higher loan amounts
- Longer tenures
- Better cash flow management
It is often used instead of unsecured business loans for large funding needs. According to Bajaj Finserv, business mortgage loans provide substantial financial leverage.
Types of Mortgage Loan Based on Property Type
5. Mortgage Loan Against Residential Property
Residential properties are considered lower risk, making them attractive to lenders.
Benefits:
- Higher LTV ratios (50%–70%)
- Lower interest rates
- Faster approvals
According to RBI’s LTV guidelines, residential properties under ₹30 lakhs can get up to 90% LTV ratio.
6. Mortgage Loan Against Commercial Property
Commercial properties like offices, shops, and showrooms are widely accepted.
Key points:
- Strong rental potential improves eligibility
- LTV usually ranges from 60%–70%
- Suitable for large business funding
These loans help entrepreneurs expand their commercial operations effectively.
7. Mortgage Loan Against Industrial Property
Industrial properties include factories, warehouses, and manufacturing units.
Considerations:
- Lower LTV (40%–60%)
- Additional compliance checks
- Higher risk perception
These loans are common in manufacturing and logistics sectors. HDFC Bank provides specialized solutions for industrial mortgage loans.
Legal Classification of Mortgage Loans (As per Indian Law)
Under Indian law, mortgage loans are also classified as:
- Simple Mortgage – Borrower agrees to repay the loan and allows the lender to sell the property in case of default.
- Equitable Mortgage – Created by depositing title deeds with the lender. Most commonly used in India.
- Registered Mortgage – Requires formal registration with the sub-registrar office.
Mortgage Loan vs Home Loan: Key Difference
| Parameter | Mortgage Loan | Home Loan |
|---|---|---|
| Property | Already owned | Being purchased |
| Usage | Flexible | Housing only |
| Interest Rate | Slightly higher | Lower |
| Eligibility | Higher | Moderate |
According to RBI guidelines, home loans have specific LTV caps based on property value.
How to Choose the Right Type of Mortgage Loan
Ask yourself:
✅ What is the purpose of funds?
✅ What type of property do I own?
✅ How much EMI can I comfortably pay?
✅ Do I need flexibility in usage?
The right answers will point you to the most suitable mortgage structure. Consult with CreditCares experts for personalized guidance.
Common Mistakes Borrowers Make
❌ Choosing unsecured loans despite owning property
❌ Selecting short tenure leading to high EMI
❌ Not comparing bank vs NBFC offerings
❌ Ignoring prepayment clauses
According to ICICI Bank, understanding prepayment terms can save thousands in interest.
Final Thoughts
Mortgage loans are powerful financial tools when used correctly. Understanding the different types allows you to minimize cost, maximize eligibility, and maintain financial stability.
Choosing the right mortgage loan type is more important than choosing the lender.
Frequently Asked Questions (FAQs): Types of Mortgage Loan
How many types of mortgage loans are there in India?
There are multiple types based on purpose, property type, and legal structure.
Is Loan Against Property the same as a mortgage loan?
Yes. LAP is a commonly used form of mortgage loan.
Which mortgage loan has the lowest interest rate?
Mortgage loans against residential property usually have the lowest rates. Check RBI repo rates for current benchmarks.
Can mortgage loans be used for business purposes?
Yes. Business funding is one of the most common uses.
What is the maximum tenure for mortgage loans?
Typically up to 25 years, depending on lender and borrower profile.
Call to Action
If you’re confused about which type of mortgage loan suits your needs, expert guidance can help you secure better rates, higher eligibility, and smoother approval.
Contact CreditCares to speak with a mortgage specialist and evaluate your property and funding options.
📞 Call Now: 9830038870
📧 Email: creditcaresindia@gmail.com
📍 Visit: 56L, Bidhannagar Rd, Ultadanga, Kolkata, West Bengal
Related Resources:
- EMI Calculator – Calculate your monthly payments
- CIBIL Score Guide – Improve your loan eligibility
- Documentation Checklist – Know what documents you need
