Top 10 Home Loan Myths Debunked
December 03, 2024
Buying a house is a dream for many, and a home loan can make this dream a reality. However, there are several common misconceptions and myths surrounding home loans that may discourage you from taking this step.
To help you make an informed decision, we've debunked the top 10 home loan myths.
#Myth 1: Your Credit Score Must Be Perfect
Fact: While banks prefer applicants with a credit score of at least 750, having a low credit score doesn't mean you can't get a home loan. The bank may approve your application but offer a higher interest rate. It's important to work on improving your credit score to get better loan terms.
#Myth 2: A Shorter Tenure Is Always Better
Fact: While a shorter tenure helps you repay your loan faster and reduces the total interest paid, it also means higher EMIs. It's essential to assess your financial situation and choose a tenure that aligns with your budget. Opt for a shorter tenure only if you can comfortably afford higher EMIs.
#Myth 3: You Need to Pay a Penalty for Prepayment
Fact: As mandated by the RBI, there are no prepayment charges or penalties for prepaying floating interest rate home loans. However, some banks may charge prepayment fees for fixed interest rate home loans. It's important to read the loan terms carefully before making any prepayments.
#Myth 4: Always Take a Home Loan from Your Current Bank
Fact: While you may have a good relationship with your current bank, it doesn't mean they offer the best home loan for you. It's important to research and compare loan options from different banks. Look for competitive interest rates, flexible terms, and excellent customer service.
#Myth 5: Always Choose Loans With the Lowest Interest Rate
Fact: While interest rates are important, they shouldn't be the sole factor in choosing a home loan. Consider other factors such as processing fees, tenure, prepayment options, and customer service. Analyse your requirements and choose a loan that offers the best overall package.
#Myth 6: You Cannot Get a Home Loan After 40
Fact: While securing a home loan may be challenging in later years, having a co-applicant or guarantor can enhance your eligibility. It's important to demonstrate a stable income source and provide documentation that supports your loan application. Explore different banks offering home loans to individuals above the age of 40.
#Myth 7: Home Loan Balance Transfer Always Helps You Save Money
Fact: Balance transfer is the process of transferring your existing home loan from one bank to another to take advantage of better interest rates. While it can be beneficial in many cases, it is not always a guaranteed money-saving option. Before opting for a balance transfer, it is crucial to do a cost-benefit analysis and consider factors such as processing fees, legal charges, and other associated costs.
#Myth 8: An Increase in Interest Rates Will Lead to Higher EMIs
Fact: Contrary to popular belief, an increase in interest rates does not always result in a higher Equated Monthly Instalment (EMI). Banks often extend the loan tenure when interest rates increase to avoid a sudden hike in EMIs. However, if you can afford it, you have the option to choose a higher EMI even when interest rates increase.
#Myth 9: Fixed Rates Are Much Better Than Floating Interest Rates
Fact: While many believe fixed interest rates are always better than floating rates for home loans, this isn't necessarily true. Fixed interest rates remain constant throughout the repayment tenure, but they are generally higher than floating interest rates. On the other hand, floating interest rates fluctuate based on market conditions and can be lower than fixed interest rates.
#Myth 10: Home Loan Insurance Is Compulsory
Fact: Many people believe that taking home loan insurance is compulsory when availing a home loan. While it is not mandatory, the Reserve Bank of India recommends that every home loan borrower should consider taking home loan insurance. This insurance provides financial security to your family in case of any unfortunate event and ensures that they can continue repaying the loan even if you are no longer around.
Final Thoughts
Stay informed before applying for a home loan. Remember to assess your financial situation, research different banks, compare loan terms, and weigh all relevant factors before finalising your home loan.
Buying a house has never been this easy! Avail Ujjivan SFB’s wide range of affordable home loan products and enjoy a hassle-free loan journey. From house purchase loan to plot loans and home improvement loans, we have it all! Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
FAQs
1. Can I transfer my home loan from one bank to another?
Yes, you can transfer your home loan from one bank to another through a balance transfer process.
2. How can I improve my chances of getting a home loan with a low income?
Having a co-applicant or guarantor with a stable income can enhance your eligibility for a home loan.
3. Is home loan insurance mandatory?
Home loan insurance is not mandatory but recommended to provide financial security to your family in case of unforeseen events.
4. Should I always take a home loan from my current bank?
It is essential to research and compare different banks before finalising your home loan. Your current bank may not offer the best terms for your requirements.
5. Does a home loan balance transfer always save money?
Balance transfer can save money in certain scenarios, but it is essential to consider associated costs before making a decision.
6. Can I get a home loan after the age of 40?
While it may be challenging, you can still get a home loan after the age of 40 by having a co-applicant or guarantor.
7. Is the lowest interest rate always the best offer for a home loan?
Consider various factors such as processing fees, prepayment charges, and repayment terms when choosing a home loan, not just the interest rate.
8. Will an increase in interest rates result in higher EMIs?
Banks often extend the tenure to avoid a sudden increase in EMIs when interest rates rise.
9. Can I get a home loan for purchasing land?
Yes, you can avail a home loan for purchasing land if it meets the criteria set by the bank.
10. Can I get a home loan if I am self-employed?
Yes, self-employed individuals can get home loans provided they have stable income or business. You may need to provide additional documents like business proof, last two years’ I-T Returns, P&L statement along with balance sheet, etc. Check with your bank for further details.
Latest Blogs
Fixed Deposits vs. Government Bonds: Which is Safer?
November 29, 2024
When it comes to investing our hard-earned money, safety is always a top priority.
How to Navigate Financial Planning for Major Life Events
November 29, 2024
Life events such as marriage, starting a family, buying a home, career changes, and retirement often trigger significant shifts in your financial situation.
Financial Security Planning: 5 Key Principles To Follow
November 29, 2024
Imagine living without the constant worry about money. That’s what effective financial security planning can offer.
Financial Planning for MSMEs Seeking Loans: Tips and Strategies
November 29, 2024
Financial planning is essential for Micro, Small, and Medium Enterprises (MSMEs) seeking loans, as it helps them navigate the complexities of securing financial support while ensuring sustainable growth.