Buying a house is an expensive affair, even if you are financially independent. With the price of real estate surging every year, you will need a substantial amount to turn your dream of owning a house into reality. In such cases, a housing loan can help you realize this dream – home loans are affordable alternatives with a host of perks and benefits. However, there still exists several myths and misconceptions regarding such loans that often cloud the minds of potential borrowers and keep them from opting for one. Read on to know and bust the biggest myths about housing loans.
Top 10 Myths About Home Loans in India
Listed below are the top 10 myths regarding a housing loan, busted.
1 – A housing loan comes with a high rate of interest
Fact – Home loan interest rates are a function of credit tenor. The longer the repayment tenor, the higher the rate of interest. The top financial institutions offer affordable housing loan interest rates starting at minimum rates.
2 – A penalty is always applied on loan prepayment
Fact – The penalty varies from one lender to another. While zero prepayment charges are applied in the case of floating home loan interest rates, nominal charges are levied on fixed rates of interest.
3 – RBI determines the home loan interest rate
Fact – Although the central bank of India, RBI (Reserve Bank of India), determines the key rates, it is upon the lender to decide the final home loan interest rate depending on various factors. Due to this, different lenders charge different rates, offering the borrower multiple options to choose from.
4 – Shorter home loan tenors are always better
Fact – Most borrowers believe that opting for a shorter tenor is the best way to go as that will rid them of the loan repayment burden and lead to lower interest charges. However, they fail to realize that a shorter loan tenor also increases the EMIs (equated monthly installments). If the monthly EMIs are too high, the chances of default in repayment are also high, which, in turn, can lead to penalty charges. Thereby, the home loan tenor should always be chosen depending on income, occupation, assets, and other personal/financial goals.
5 – Credit score is the only determining factor for the issuance of a housing loan
Fact – Although a good credit score, preferably 750 or above, does help the lender verify the borrower’s creditworthiness, it is not the sole factor that decides whether the loan application should be approved. Apart from a decent CIBIL score, certain other factors, like the age of the applicant, employment status, income, financial liabilities etc. also determine the borrower’s home loan eligibility.
6 – Fixed rates of interest are better than floating interest rates
Fact – Market fluctuations may result in frequent changes in the floating interest rate. Generally, the floating interest rates are lower than the fixed rates by 1.5-2%. Additionally, since these fluctuations are temporary and do not last long, you may end up paying lesser home loan interest in the long run.
7 – A housing loan ensures and verifies property title
Fact – While it’s true that the lender assists in conducting due diligence on the property and related documentation, it is the responsibility of the owners to verify the property deeds and documents related to it.
8 – Home loan terms are non-negotiable
Fact – Contrary to popular belief, the housing loan terms shared by the lender are negotiable. You can always have a word with them regarding the favorable terms before signing on the dotted line.
9 – Monthly EMIs are set by the lending institution
Fact – The lender does not determine home loan EMIs – the borrower himself chooses the monthly EMIs from various options. This is typically done with the help of an online home loan EMI calculator that takes into account the principal amount, rate of interest and tenor chosen to offer an estimated and suitable EMI.
10 – There are no tax benefits
For loans that are jointly taken, each borrower can claim a deduction for home loan interest up to INR 2 lakh each. Now that we have busted the major myths about housing loans, consider applying for home loan online instead of going with the traditional method to save time.
How to Apply for a Home Loan Online
To apply for a housing loan, all you need to do is follow these steps:
- Visit the chosen lender’s website and access the ‘Home Loan’ page
- Fill out some important details and hit the ‘Apply’ button
- Upload photocopies of a valid ID and other essential documents
- Get in touch with the lender for verification
- Get the property verified and the loan sanctioned
- Have the home loan amount disbursed and wait for it to get credited into your account within 3-4 days
Summary
Now that we have busted some of the common home loan myths, you can go ahead and apply for a home loan online to make your dream of becoming a home owner come true. If you have any doubts, you can always reach out to your lender for better knowledge and understanding.
