Out of all loans offered by Indian lenders, home loans are the most popular. However, not having the right knowledge can stop you from realising the full potential of a home loan.
This article demystifies the five infamous myths that are associated with home loans and inform you everything you need to know before applying for home loan online.
- The Lower the Interest Rate, The Higher the Savings
Nothing can be further from the truth. Many lenders entice their borrowers by offering a low rate of interest. However, by offering you a low rate of interest, they ask you to pay more as a downpayment. Moreover, you have to accept a reduced loan to value. Generally, any reputed lender requires 10% as downpayment and offers you up to 90% of your property’s market value as the loan amount. Check the home loan interest calculator and know for real how much loan amount you are eligible for.
- A Longer Repayment Tenure Brings Down the EMI
Generally, a reputed lender allows up to 30 years for loan repayment. Many lenders would want you to opt for the maximum tenure as it would require you to pay less every month. However, by applying for a home loan with the longest tenure online, you will have to pay more, as the interest rate charged will be substantially higher than the prevailing lowest interest rate.
As an informed borrower, you should open a home loan interest calculator and check the EMI amount for both long and short duration to see how much you can afford every month. By choosing a shorter tenure, you can take advantage of lower interest rate and quicker ownership of your dream house.
- The Higher the Credit Score, the Higher the Chances for Loan Approval
This statement is 50% true and 50% false. Approval of a home loan you apply online depends on many factors, which include your credit score, monthly liabilities, existing debt, disposable income, the security of income, age, location, and loan repayment history. While credit score forms an integral part of the loan approval process, it cannot be held as the most important factor that guarantees loan approval.
- Fixed-Rate Loans are More Dependable Than Floating Rate Home Loans
This seed of this concept is rooted in the pre-liberalisation era when applying for a loan was a costly affair. As home loan interest rates were excessively high, borrowers preferred to opt for fixed-rate home loans, as it was easier for them to plan their finances accordingly.
As times have changed, the home loan interest rates are hovering near their decade lows. If you check a home loan interest calculator, you would be amazed to find that the lowest interest rates begin from as low as 8.60% p.a. at present. Compare this with someone who availed of a loan before 2017; the borrower is still paying an interest rate of over 14% p.a.
- Physically Applying for a Home Loan is Better Than Applying Online
Every time you visit a lender’s office and get your EMI calculated by an official operating the home loan interest calculator, your credit score takes a hit, as lender-initiated credit score requests are considered as hard enquiries. By contrast, when you check a home loan interest calculator online, it is a soft enquiry and does not impact your credit score.
While this is a small list of the most infamous myths that are associated with a home loan, several other myths are as disastrous as the top five mentioned in this article.