Myths About Home Loans That You Should Not Believe
Those trying to buy a home are using home loans more frequently now. Although the desire to own a home has grown, not everyone has the financial means to do so right away. As a result, a lot of people today use the option of home loans to construct their ideal residences.
There are still some widespread misconceptions regarding home loans, despite the fact that banks offer useful resources like a home loan EMI calculator and that home loans have become increasingly popular. Discover the most typical home loan myths in the following paragraphs and stop believing them right away.
High-interest rates for home loans
The home loan rates are influenced by the length of the credit arrangement. As the payback period lengthens, the interest rate increases. The interest rate that the lender charges may also be influenced by additional variables, such as the applicant’s income and the borrower’s age. Whenever you are youthful and have a decent salary, the lender will reduce your interest rate. As a result, you won’t continuously have to worry about excessive EMIs.
You are guaranteed a home loan if you have good credit
Your case is helped by a high credit score. It does not, however, determine whether a loan application will be granted. The lender will only take into account a few things when you apply for a home loan. Age, employment position, job stability, and financial commitments all have an impact on a person’s capacity to obtain a home loan. All these variables play a role in the lender’s decision as to whether you are eligible for the home loan. You won’t be able to receive a home loan even though having a strong credit score can boost your chances if you don’t also meet the other standards.
Loans with low-interest rates are the best
Only one factor—interest rates—affects how much you have to spend to repay your loan. Even worse, a lender could reduce the house loan interest rate while raising the processing charge, legal valuation, and other costs, making the loan repayment far more expensive. It is essential to take into account both the interest rate and any other costs when selecting a home loan.
Home loans with fixed rates are preferable to those with fluctuating rates
It is not a given that you will be able to benefit from a home loan for the whole term of the loan. The rate is only fixed for the duration of a fixed-rate mortgage. While the certainty of a fixed-rate loan’s monthly interest payment is present, reduced interest rate flexibility is not.
The RBI determines the home loan interest rate
Another myth is that the RBI determines the interest rates for home loans. The Reserve Bank of India (RBI) controls interest rates all over the country. The interest rate on each lender’s house loan is, however, not directly under its control. Lenders (such as banks and housing finance businesses) set the interest rates for the home loans they offer based on their cost of funds. As a result, home interest rates may vary between lenders. Because of this, different lenders provide consumers with a variety of options and charge different interest rates for house loans.
Short-term home loans are better
One widespread misconception about house loans is that picking a loan with a shorter repayment time is better. However, because the period is shorter, you must pay more in EMIs (Equated Monthly Installments). As a result, it is best to consider your alternatives and pick the duration and EMI payment that best suit your needs.
Pre-payments are heavily penalized
Although it’s true that banks don’t like pre-payments, they don’t really impose severe fines on them either. From one financier to another, it fluctuates. RBI guidelines state that lenders cannot apply prepayment penalties for residential loans with floating interest rates. However, institutions may choose to apply these fees on house loans with fixed interest rates, which can again differ between institutions.
The property is real if the home loan is granted
One of the most pervasive myths about house loans is this one. Even while the lender does due diligence on the paperwork and other aspects of the property, it is the buyer’s responsibility to independently confirm the validity of the title deeds.
No negotiation with the terms of home loans
Many people think that they have little control over the lender’s terms and that they are binding. However, you can always bargain with your lender and come to a better agreement. Now that you are aware of and have dispelled the most prevalent myths around house loans. Therefore, this can be a great moment to get a loan for the home of your dreams.