Getting your own house is a very expensive affair. No doubt home loan comes to the rescue, but you still have to do a lot of research, take out time to gather all the documents, check for eligibility, calculate the EMIs, and the list is on. Even in terms of money, there are so many extra charges you have to pay. You start with the registration fees and end up paying more than you thought. But with HDFC , we believe everyone deserves to have their own home. And to make sure, the loan process is made quite simpler and affordable. Below is a list of myths about the home loan process that will help you clear all your doubts.
Myth 1: You should go for a home loan that offers a lower rate of interest
When you choose to opt for home loans, one of the most important things you see is the amount of interest charged. And naturally, you go for the lowest rate of interest. At first, it seems like the smartest choice. However, you should also keep other factors in mind. For instance, there are a lot of other costs that are involved with the home loan. To give you an example, there may be a bank that is charging a minimal rate of interest, but its processing fee or technical valuation charges may be more than other banks. The rate of interest charged depends upon a lot of factors. It may be your credit score, your income source, etc. So, it is always important to consider all the factors before going for a home loan.
Myth 2: A good credit score is the only good thing needed for getting a home loan
There is no doubt in the fact that the presence of a high credit score implies that an individual meets the criteria for housing loan eligibility. Home loans are more likely to be approved for individuals with a high credit score. In most cases, a credit score of 700 or more will get you a home loan. If your score is on the higher side, you can also get a home loan at a lower interest rate.
There are other factors as well that financial institutions take into consideration. For instance, your ability to repay the loan in due time, your current income, etc. The representative from the bank will give you all the information. People who are taking a loan for the first time and do not have a credit score, also don’t need to worry.
Myth 3: Cash earners are not eligible for loans from registered NBFCs or banks
A company’s decision to lend you money is heavily influenced by your income type. It plays a crucial role in home loan eligibility. However, this is not true if you earn in cash, no authorized company will give you a loan. Many banks will be happy to help you in your loan process. The only thing they want is to have a regular income or a source to pay back the loan.
Myth 4: The home loan offering bank will authenticate the property
Banks follow the process of providing a home loan. They do not indulge in the authenticating process of your home. The concept of home authentication and the concept of home loans are different from one another.
Myth 5: You will be charged a penalty for a home loan pre-closure.
Many borrowers fear being penalized for pre-closing a home loan. However, there is no need to worry about it. RBI has banned banks and housing finance companies from charging foreclosure penalties on home loans with a floating rate of interest. Those who want to prepay the loan amount, they can do so and get some peace of mind.
Myth 6: A fixed interest is better than a floating interest rate
Another misconception that people have is that a fixed interest rate would be more beneficial for them than a floating interest rate. Let us first understand what is a fixed rate of interest and what is a floating rate of interest.
Fixed rate of interest: Under this, the rate of interest stays the same for the entire tenure
Floating rate of interest: Unlike a fixed rate of interest, this one changes quarterly following several factors that may affect bank interest rates.
When it comes to benefits, both of them have their benefits. However, a fixed rate of interest may turn out to be more expensive. If you choose the floating rate of interest, there are chances that you will be able to save some money.
Myth 7: Short-term loans are more beneficial
Short-term home loans are often perceived as better than long-term loans by many borrowers. However, this isn’t true, since a high EMI increases the borrower’s costs. Borrowers can choose a medium- or long-term loan in such cases.
Myth 8: The Reserve Bank of India fixes interest rates on home loans
RBI fixes the market interest rates. However, it is not necessary that it fixes interest rates for all the lenders. In general, home loan interest rates are set by lenders based on their costs of funds. It is therefore possible for interest rates on home loans to differ from one lender to another.
Home loan is a huge responsibility. It is a long-term process and hence due time and research are required before opting for a loan. The above myths will help you save your time, reduce the risk factor, and you will be able to avail all the benefits.