Buying a house is going to be one of the biggest decisions of your life. Real estate prices are expensive, because of which there needs to be a lot of research on how you are going to afford a house. What most people do is apply for home loan plans in order to get the financial support they need. While a home loan can be a great way to afford a property purchase, there are certain myths surrounding such loans. This should not come in the way of getting that house you always dreamt of, which is why it is important to be aware of such myths.
So, here is a list of the various misconceptions surrounding home loans in India.
Myth 1: Prepaying a home loan attracts heavy penalties
Previously, borrowers had to face foreclosure penalties in case they chose to prepay their home loans. However, this is no longer the case if your housing loan has a floating interest rate. As per RBI guidelines, banks are not permitted to charge any penalties for prepayment if the home loan has a floating interest rate.
Myth 2: Short repayment tenures are always the best option
While it is true that a short repayment tenure can help save money on interest by cutting down the number of monthly instalments, it is not always the best option. Choosing a short repayment tenure would mean paying higher monthly instalments, which would result in lesser savings. This can be a problem if there is ever an emergency where you need to take care of the expenses. This is why it is better to choose a tenure in which you are comfortable in paying the EMIs.
Myth 3: Home interest rates are non-negotiable
Many people think that the interest rates offered by lenders are set in stone. However, this is not true. If you have a good credit score of 750 or above and have always cleared your dues on time, it is possible to negotiate with the lender for a better interest rate. Since lenders prefer borrowers with good credit scores, they offer better loan terms such as lower home loan interest rates and higher loan amounts.
Myth 4: Home loans cannot be transferred
Your existing home loan cannot get better terms, even if there are better loan plans out there. This is another myth that you need to stop believing in. If you come across a lender offering a better loan plan, it is possible to go for a home loan balance transfer. With this transfer, your current loan is transferred from one lender to another, often for a lower interest rate, a top-up loan, or even a better repayment tenure.
After knowing the truth behind these myths, you are now in a much better position when it comes to applying for a home loan. Speak with a lender and carefully decide which loan plan is a suitable option. In addition, check with the lender regarding their home loan eligibility criteria as this could differ based on each financial institution’s terms and conditions.