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How to utilise your mortgage loan

September 01, 2008 13:23 IST
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The home is a valuable asset that most home owners acquire over time. Trading it for cash with a mortgage can be a less expensive way to avail of a loan, but it should not be used lightly. It makes sense to shop carefully for mortgage loan quotes before borrowing, and to prioritise the use of the mortgage loan. After all, a mortgage loan uses the property as collateral, so it should only be used to finance purchases that are worth that risk.

In general, a mortgage loan should be used when the following conditions are met:

  • The purchase is long-term in nature.
  • Loan quotes show a distinct interest rate advantage compared with other methods of financing.
  • A repayment plan has been carefully budgeted.

Given below are some examples of possible utilisation of your mortgage loan:

  • Debt consolidation: This is a common reason why a mortgage loan may be availed of, since such loans generally carry lower interest rates than other loans like personal loans. Debt consolidation allows borrowers to pay less interest by securing their debt with their home.
  • Home improvements: With the festive season around the corner, home improvements can be a way of adding value to a home or increasing its marketability. Using a mortgage loan to add space may be cheaper and involve less hassles than taking an unsecured loan. As in unsecured loan The term of repayment for an unsecured loan is shorter, as compared to mortgage loans, which in turn results in a high EMI.

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  • For your children's higher education: While not investing in the house itself, money from a mortgage loan can be utilised for your children's higher education because it represents an investment that has long-term benefits and should produce an eventual financial return. Mortgage loan financing rates compare favourably with most types of private education loans. However, there are many forms of subsidised or assisted financial aid for college, so it would be wise to compare mortgage loan quotes with other education loans before committing.
  • Starting a business: Banks and finance institutes offering business loans are notorious for the number of hoops they make borrowers jump through with regards to higher rates of interest and short durations. Mortgaging a property, if available, can be more feasible in terms of the rate of interest and the repayment term. Of course, you should put together a business plan before attempting entrepreneurship; receiving a mortgage loan to start a business is likely to take much less time, because valuing a home is easier than evaluating a business.
  • For medical treatments: With the cost of medical treatments going through the roof, even the well-insured can be hit with more than they can handle -- many treatment centres today want a significant portion of payments to be made up-front. A mortgage loan may be the best way to get top-rated care sooner for a serious condition.
  • Down payment for property investment: Finance for the down payment of an investment property is a good option, as a boom in the property market can give good returns on the investment made at this point, while paying low interest rates.

As a general rule of thumb, the best matches for long-term financing are long-term purchases. It may be anything from a boat to a medical procedure, as long as the home owner has reasoned that the item justifies using the home as collateral. provides information on home loans, car loans, personal loans, mortgage loans, education loans, business loans, term loans & project loans in India. provides information on home loan, car loan, personal loan, mortgage loan, education loan, business loan, term loan & project loan in India.

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