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9 Common Home Loan Myths Busted Just For You!
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With skyrocketing prices of real estate, it could be challenging to buy a house from your savings. But a home loan can be helpful, making it easier for you to afford the house of your dreams. However, you could be reluctant to avail a housing loan due to the various myths surrounding it. In order to clear your doubts, below, some of the common myths are busted to help you make an informed decision.
Myth 1: You cannot get a home loan if you have a low credit score
Lenders prefer sanctioning home loans for applicants who have a credit score of at least 750. However, it does not mean that you cannot get a loan at a lower credit score. The lender can approve your loan application with a low credit score but offer a high interest rate.
Myth 2: You must opt for a short tenure
A shorter tenure would help you repay your loan faster. However, it would mean higher EMIs and a tight budget, increasing the chances of default. Opt for a short tenure only when you can afford higher EMIs.
Myth 3: You need to pay a high penalty for prepayment
There are no prepayment charges or penalties for prepaying the floating interest rate home loan as mandated by RBI. However, charging prepayment charges for fixed interest rate home loans is at the discretion of the lender.
Myth 4: You must always take a home loan from your current bank
You must not avail a home loan without adequate research on the available options. You could have a cordial relationship with your bank but they might not offer the best home loan for you. It would be best to compare other options as well.
Myth 5: Home loan insurance is mandatory
Home loan insurance is not a mandatory requirement. However, Reserve Bank of India recommends that every home loan borrower must take home loan insurance as it supports your family to repay the loan in your absence.
Myth 6: Fixed rates are better than the floating interest rate
Fixed rates are not always better than floating interest rates. Fixed rates are constant but are a few points higher than floating interest rates. Moreover, your EMI remains the same despite a fall in home loan interest rates.
Myth 7: Home loan balance transfer always helps you save money
If the cost of transfer is more than the savings, it would be the wrong choice for you. You must do a cost-benefit analysis before transferring the loan.
Myth 8: You cannot get a home loan after 40
You could face challenges in availing loans in the later years of your life. But you can enhance your eligibility and chances of approval by having a co-applicant or a guarantor.
Myth 9: An increase in interest rates means higher EMI
This is not true as lenders usually extend the tenure when the interest rates increase to avoid a hike in EMI. However, if you can afford it, you can choose to pay a higher EMI.
Knowing about these various myths would help clear your doubts. It would be best to check your affordability before applying. You can use a home loan calculator to avail an affordable home loan.
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