7 Myths About Home Loans Exposed

When it comes to availing a home loan, there are several apprehensions pertaining to it. Availing a mortgage is a huge decision as the tenure of the loan is relatively long and the amount is often huge. However, if you are planning on availing a home loan, there are several myths that need to be debunked to help you understand how your mortgage works. These myths associated with home loans often make even potential borrowers take a step back. Here we explain some of the common home loan myths which will help you in making your dream of owning a house come true.

Often borrowers feel that if a bank approves a home loan, the property documents are verified, and the property is safe to buy. However, this is not true. It is your responsibility as a homeowner to check the financial and legal aspects of the property. Although the bank will run a basic background check to avoid any potential legal discrepancies that may arise in the future, you will have to make sure that the property is registered, and all the documents are valid.

There are two types of interest rates that can be charged on your home loans, namely floating interest rate and fixed interest rate. Most borrowers feel that a fixed interest rate is better as the EMI payable does not change. However, a fixed home loan interest rates are not always the best deal. Fixed interest rate loans are also subject to change periodically as and when the bank decides to. Also, if the bank reduces their floating interest rate, those who opted for fixed rate home loans will not be able to enjoy the benefit.

When it comes to any line of credit, borrowers mostly focus on the EMI amount payable every month. If you opt for a long home loan tenure, your monthly EMI amount may be low, but you will land up paying a lot towards interest. There is no right or wrong home loan tenure. It varies from one borrower to another. So, paying as much as you can every month and trying to pay off the mortgage sooner is an ideal practice.

Transferring your home loan from your current lender to another will not have a negative impact on your credit score. Not paying your home loan EMIs does. In case, you find a lender who is ready to offer you an attractive interest rate which will help you pay off your mortgage easily, you can go ahead and consider home loan balance transfer option.

Also Read: The Top 6 Personal Loan Providers for Borrowers With Less Than 700 Credit Score

Home loans can be availed for many purposes such as buying a new house, renovating your current house, purchase land for investment or to build a house, or for home extensions. The purpose of you availing a home loan will determine the interest rate, loan tenure, tax benefits, and more. You can also apply for a home loan.

Yes. Having a low interest rate on your home loan will help you save money. However, it is not the only factor you should be considering when you avail a mortgagee. Often, home loans with a low interest rate will have high fees and charges and will not allow you to make prepayments or foreclose the loan for a particular duration. During this time, you will pay a lot towards interest which will not help you save. On the other hand, a high interest rate loan might allow you to pay off your loan sooner and help you save more in the longer run. Therefore, when availing a home loan get more realistic and calculate the total loan amount (Including fees and charges) you will land up paying and compare various loans before you choose one.

A high credit score plays a crucial role in increasing your eligibility and getting your home loan approved. However, it is not the only factor. Having a high credit score does not guarantee home loan approval. There are many other factors that will determine the status of your home loan application such as your age, income, your Debt-to-Income Ratio, your credit utilisation rate, and more.

Now, that you know about some of the home loan myths, you can go ahead and pick the right mortgage. All the best!