A home loan is a financial instrument that fulfills your dreams.
As the financial liability of a loan is long-term, as an informed borrower, you must know the myths associated with home loans before applying for a home loan.
1. A Low Rate of Interest is the Best
Lenders offering low-interest rates often charge higher down-payment, provide lower loan amounts, and reduce the tenure for repayment. As a borrower, it is better to choose a lender who scores low on down-payment, and high on the loan amount and repayment tenure, even if the rate of interest is a little higher.
2. Pre-payment Means Higher Penalty
Till a few years back, lenders used to charge pre-payment penalties, but not anymore. Many CRISIL FAAA rated lenders have done away with pre-payment penalties for home loans with a floating rate of interest. For loans with a fixed rate of interest, the charges are 3% of the principal prepaid.
3. A Loan With Fixed Interest Rate is Better Than a Loan With Floating Rate of Interest
Typically, the floating rate of interest is lower than the fixed rate of interest. It has generally been observed that, over a longer time, floating interest rates have saved more money of the borrowers than a fixed one.
4. High CIBIL Score Guarantees Loan Approval
Approval of a home loan depends on multiple factors like the applicant's stability of income, profile, residential area, among other factors. CIBIL score forms a small part of the verification process.
5. Home Loan is a Must For Saving Taxes
Only if you fall in the highest tax bracket can a home loan save your taxes. For the rest, there are many other tax-saving options better than a home loan.
Conclusion
Before you apply for a home loan, clarify your questions to verify whether it is a myth or a real fact.
Click here to learn how you can get the best home loans at attractive interest rates.
Read More:
Difference Between Loan against Property (LAP) and Home Loan
Things to keep in mind before taking a loan against property
As the financial liability of a loan is long-term, as an informed borrower, you must know the myths associated with home loans before applying for a home loan.
1. A Low Rate of Interest is the Best
Lenders offering low-interest rates often charge higher down-payment, provide lower loan amounts, and reduce the tenure for repayment. As a borrower, it is better to choose a lender who scores low on down-payment, and high on the loan amount and repayment tenure, even if the rate of interest is a little higher.
2. Pre-payment Means Higher Penalty
Till a few years back, lenders used to charge pre-payment penalties, but not anymore. Many CRISIL FAAA rated lenders have done away with pre-payment penalties for home loans with a floating rate of interest. For loans with a fixed rate of interest, the charges are 3% of the principal prepaid.
3. A Loan With Fixed Interest Rate is Better Than a Loan With Floating Rate of Interest
Typically, the floating rate of interest is lower than the fixed rate of interest. It has generally been observed that, over a longer time, floating interest rates have saved more money of the borrowers than a fixed one.
4. High CIBIL Score Guarantees Loan Approval
Approval of a home loan depends on multiple factors like the applicant's stability of income, profile, residential area, among other factors. CIBIL score forms a small part of the verification process.
5. Home Loan is a Must For Saving Taxes
Only if you fall in the highest tax bracket can a home loan save your taxes. For the rest, there are many other tax-saving options better than a home loan.
Conclusion
Before you apply for a home loan, clarify your questions to verify whether it is a myth or a real fact.
Click here to learn how you can get the best home loans at attractive interest rates.
Read More:
Difference Between Loan against Property (LAP) and Home Loan
Things to keep in mind before taking a loan against property
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