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Can a Loan Against Property be Converted into a Home Loan?

Real estate

Can a Loan Against Property be Converted into a Home Loan?


To answer your question right off the bat: NO! A home loan differs greatly from a loan against property (LAP). For starters, the interest rate on a home loan is lesser than the interest rate on a mortgage loan or a LAP loan. The difference is that the property in question does not belong to the borrower at the loan application time with a housing loan. In contrast, with a loan against property, an existing asset (house/land) is mortgaged as security.

Converted into a Home Loan

Other factors based on which these two loans vary as follows:

What is a Home Loan?

A home loan is a type of loan that offers funds to borrowers to finance a home purchase. The loan can be available if you want to purchase a new residential property, construct a residential property, or purchase land to build a home. The interest rate on a home loan is lesser than rates applicable on loans against property, and with Bajaj Housing Finance, a home loan applicant can avail of up to Rs.3.5 crore to make their dream purchase.

Home Loan Interest Rates

Individuals applying for a home loan can avail of interest rates based on the property value and monthly income. If you have a high income, a good CIBIL score, and work in a reputed organization or an MNC, your chances of getting a low rate on a home loan is higher. The interest rate is fixed, and the principal remains constant throughout the tenure. On the other hand, the principal and interest payments on a home loan with floating rates vary. With Bajaj Housing Finance, you can avail of a home loan of up to Rs. 3.5 crore at attractive interest rates to finance the purchase of your dream home. The loan tenure is quite flexible, and the repayment tenure can be as long as 360 months.

Purpose of a Home Loan

  • Purchasing a home
  • Land purchase
  • Buying a plot
  • Property construction
  • Finance home improvement expenses
  • Property Conversion
  • Extension of home

What is Loan Against Property?

A loan against property is available to borrowers who own a property that can be pledged as collateral against the loan. It is one of the easiest ways to get a large loan quickly. When individuals avail of a LAP loan, there are no restrictions on using the loan amount. The funds can consolidate debt, finance higher education, invest in a business, or even be used for emergencies. A loan against property can also be used to purchase a new home or property.

Loan Against Property Interest Rate

A loan against property (LAP) can have a fixed or floating interest rate. Like a housing loan, the borrower can pick an interest rate system that is advantageous to them. However, the loan against property interest rates is comparatively higher than home loans. With Bajaj Housing Finance, you can avail of a loan against property (LAP) of up to Rs. 1 crore at an affordable interest rate and flexible repayment tenures of up to 360 months.

Converting Loan Against Property into a Home Loan

It is impossible to convert a LAP loan into a home loan as the nature of both is different, as are their terms and conditions. For example, if a borrower cannot bear the burden of a mortgage loan, then s/he can opt for alternatives like a balance transfer facility. This facility transfers the loan balance to another desired bank offering better interest rates or a longer tenure. The loan balance transfer facility allows you to share the outstanding loan amount from one financial institution.

Certain banks and financial institutions have a minimum balance requirement before initiating the loan balance transfer. You can convert a LAP loan to a home loan with a balance transfer facility. To avail of this facility, a borrower must have a good credit score and a clear repayment history of previous loans. Also, make sure you go through the terms and conditions of loan conversion before using either of these credit facilities.

Eula Boone

I have written professionally since 2010 and have been an investor since 2015. My finance blog, economydiva.com, is one of the most visited blogs in the world, with more than 3 million readers a month. I love sharing what I know about investing, saving, and managing money and providing practical tips on how to be a smart and savvy money manager.