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Budgeting & Finance Guide

Can You Convert Loan Against Property To Home Loan? Discover The Tips Here

A home loan is quite different from a loan against property.

The terms involved in both of them are different from each other; on account of that, it is not technically possible to transfer loan against property to a home loan. We shall be discussing how you can technically achieve this shortly.

What You Should Know Between The Two

There is a thin line of difference between the two and it will help our clear understanding if we iron out the difference between the two.

When you take a when you apply for a home loan, the intention is strictly to purchase a home that you want to call your own. It is referred to as a mortgage loan because the house that you are taking over will be used as the collateral for the loan.

You can only use this type of loan for the singular purpose of owning your own home.

On the contrary, when you apply for a loan against property, it is also a mortgage loan but this time around; the loan is borrowed against the house that you already owned. Can we spot the difference? In the first place, the goal is to own a home while you are already a homeowner in the second instance.

The Purpose Of The Loan

We shall take a look at another factor why it is not possible to convert this loan one from the other. In the case of a home loan, it can be used strictly to own your home.

But when we consider what is obtained in loan against property, it can be used for any profitable venture under the sun by the lender. In essence, there is a gulf between the two when we take into account the purposes for which each of the loans can be used for.

The Interest Rates

Another reason why it is not possible to convert one from the other has to do with the interest rates that are applicable between the two. The interest of a home loan is far less when compared with what obtains in loan against property.

There are various reasons for this, first of it is the policy of the government geared towards providing affordable homes for all in the society. As for loan against property, individuals go for this when they are in dire need of finances. This is one of the reasons why the interests on the loan are higher.

The Risks Involved

Another reason why it is not easy to convert easily from one to the other is the risks involved in both loan requirements.

The risks on home loans are by far less than what is obtained in loan against the property because, with a home loan, the home will act as collateral. With the home loan, you are not yet in full possession of the property, so extra care is usually taken towards ensuring that there are no defaults in payments.

Even if the customer is willing to forgo his property in a loan against property, it will be hard for the bank to make an easy sale of the property.

Repayment Tenure

The repayment method is another factor that makes it impossible to easily convert from one schedule to the other. With the home loan, there is a longer repayment period compared to Home Against Property. This factor is considered as a great contributor to the reasons why it is impossible to easily convert one to the other.

Balance Transfer

Every borrower likes to minimize the costs and maximize the profits. If you feel the interests that you are paying on the loan are rather on the high side, then you can switch from one bank to the other that promises a lower interest rate.

For you to make such transfers however, banks will require that you have a minimum balance in your account to effect such a transfer. Your repayment method should be clean for the existing loan to be able to effectively carry out the transfer.

The bank will also want to look at positives from your Credit Card before they can give you the benefits of doubt. With the conditions in place, it will be possible to carry out a balance transfer.

The Foreclosure Charges

This is a factor that you have to put into consideration before you affect the balance transfer. It will amount to no effect if you are on a salary scale.

But where you are self-employed, make sure you understand the charges before making the balance transfer if you want to be on the safe side of the divide.


The loan for home and Loan Against Property are two different things entirely.

You cannot move from one to the other because of the different risks involved and the different interest rates. However, you can make do with a balance transfer from one bank to the other.