ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The amount that you can avail with home equity loan is the difference between the property’s current value and the owner’s mortgage balance due. The amount that you can avail in mortgage loan is based on the property’s current market value. It is usually 50-70% of the market value.

Detailed explanation-2: -A home equity loan works similar to a home loan. In both cases, the home serves as collateral. However, for a home loan, the eligible loan amount is up to 90% of the market value of the house. Whereas, with a home equity loan, you convert the equity on your home into cash.

Detailed explanation-3: -But what exactly is equity? In the simplest terms, your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.

Detailed explanation-4: -What is the difference between mortgage and loan? A loan is the sum of money borrowed from a financial institution to meet various goals or requirements. It may be collateral-free or secured. Mortgage refers to an immovable property that is used as collateral to avail a loan.

Detailed explanation-5: -Equitable mortgage is a type of mortgage where the terms of the agreement are made solely between the mortgagor and the mortgagee. There is no third party or government agency involved. The term “equitable mortgage” is derived from the word equity which in this context means in the interest of justice.