Common Home Loans Myths

Getting a home loan in itself can be a process that involves plenty of research. Meanwhile, there are quite a bit of myths that are circulated around. So, while researching home loans, it is important to discount these myths so that you can make smart and informed decisions. In this article, we will have a look at the common myths that revolve around home loans. Understanding these myths will help you classify between accurate and inaccurate information during your research process.

Top 5 Common Home Loan Myths

There are plenty of myths tossed around with respect to home loans in India. Now that the interest rates that are offered on home loans have decreased, most of the myths have been around the interest rate and the EMI that has to be repaid to the bank or lending institution.

1. Pre-Approval Is the Same As Pre-QualificationGetting your home loan pre-approved is the process of identifying and understanding your eligibility to apply for a home loan. During the process of pre-approval, you will be asked to submit your personal information, financial information, and your property documents. If you get your home loan pre-approved, you would not have to repeat the eligibility verification process while applying for a home loan.
   
   However, getting your home loan pre-approved does not mean that you are qualified to have the home loan disbursed. The final decision with regards to disbursal of your housing loan amount is dependent on the bank or the lender. It could so happen that you can be pre-approved and end up not being granted a home loan.
2. Higher Interest rate Translates To Higher EMIs When the lender offers you a higher interest rate, it is natural to get concerned about higher EMI repayments which could result in a financial crunch. However, it is not necessarily true. Many banks aim to make the process of EMI repayments nominal and easy for the customer. You have the option to increase your tenure and decrease the amount of EMI that you would have to pay.
   
   The bank or lending institution calculates your home loan interest rates by considering several parameters such as your age, income, credit score, and others. Having a good credit score and a good income can help fetch you a lower interest rate.
3. Loans With Lower Interest Rates Are Good DealsMany people tend to believe that banks and lending institutions that offer a lower interest rate are a good deal. However, it is important to be careful about plans that are offered. In many cases where the bank offers an exceptionally lower interest rate compared to market standards, several other fees are charged. It is best to check for charges like penalty for prepayment, legal valuation fee, processing fee, and others.
   
   If these extra charges are expensive, you might end up paying an exorbitant amount in compensation for the low interest rate. Make sure that you understand the terms and conditions thoroughly and ensure that you have no hidden charges on your home loan.
4. Fixed Interest Rates Are Better Than Floating Interest RatesWhen you decide on the nature of the interest rate, it is best to consult with your lender and consider your financial capacity. With a fixed interest rate, you can enjoy the same rate of interest throughout the tenure. With a floating interest rate, the amount of interest that will be charged will vary depending on the fluctuation in the interest rate.
5. Pre-Payments Carry Penalty ChargesPenalty charges for pre-payments might be charged by a few banks. However, there are exceptions when it comes to these penalty charges. It is best to verify these charges with the bank you plan to take a housing loan from before coming to a conclusion.

In a Nutshell

While availing of home loans in India, it is natural to come across several home loan myths. It is best to research thoroughly and validate the information you find on the internet to make sure that you are informed accurately. This can help you make the right choice with regards to your housing loan. If you are planning to opt for a home loan, you can visit Piramal Capital Housing and Finance and experience benefits such as faster loan sanctions.