Post the pandemic, there has been a significant increase in people wanting to purchase or invest in properties/ houses. Internet is usually the one-stop solution for most when it comes to seeking information on basically anything. However, with the increase in the User Generated Content outlets on the internet, it may not be the case anymore. The internet is a huge, chaotic space filled with a wealth of knowledge. Although it provides some useful information daily, it can also provide you with false information at times.
Home loans are a significant undertaking by someone. Hence it is important for one to do thorough research when it comes to availing it. Home loans have a lot of wrong information circling around the web. Let’s debunk a few of the popular myths here:
Low interest is the best way to go
This is one of the most common home loan myths, not just because it isn’t true, but also because such a statement doesn’t tell you the whole fact. Banks and other lenders are, first and foremost, for-profit businesses, and their marketing strategy revolves around attracting new clients and sales. They try to do this by attracting people’s attention with numerous appealing deals such as low-interest rates. However, the fact is that in such situations, lenders try to cover a lot of items in their terms and conditions in order to compensate for the money they are allegedly losing. For example, they can impose additional fees such as a lawful valuation fee, a processing fee, or a prepayment penalty. When you pay all the fees mentioned above, the lenders would have more than made up for the money they would have lost if they didn’t give the low-interest rate.
Longer the tenor, the lesser the EMI
Even though the statement seems true, it a big myth. While a lower EMI number may seem appealing, there is a catch. When a bank cuts the interest rate on a home loan, it usually reduces the loan’s term by holding the EMI steady. Of course, one may ask the bank to reduce the EMI while keeping the term the same. Earlier the repayment of the loan, the lesser the interest rate one pays. The home loan app comes with a calculator which helps in understanding and planning your loan and EMIs better.
Refinancing a home loan is not an option
This is another myth that needs to be demystified. Almost every lender now offers a home loan balance transfer service, which allows a home loan borrower to move their loan from one lender to another. Nobody will blame you if you want a loan that offers you a deal that is considerably cheaper than the new one. Although switching loans can be a smart idea if you aren’t getting the best deal, you shouldn’t make this decision hastily. Have a conversation with the new investor before making the move. They can also amend the terms of your loan and give you a significantly lower interest rate that you can accept.
One needs to have more than 10-20% amount as a down payment
This may have succeeded a few years ago, but today’s banking industry is much too adaptable to allow those things to deter its operations. Though a down payment is required when applying for a home loan online, it is not the end of the world if you do not have the funds on hand. Lenders will use a different property of yours as leverage to collect the necessary funds if you’re okay with it. So, in addition to repaying the loan, you’ll be making contributions to pay off the other loans.
Always opt for a fixed rate of interest
This is another myth and one that has some merit. To continue, both fixed and floating interest rate for your home loan have their own set of benefits and drawbacks. While a fixed interest rate loan gives you an identical EMI figure to pay per month, it ignores any potential interest rate decreases. A floating interest rate loan, on the other hand, takes exchange rate fluctuations into account and adds them to the amount of interest a borrower would pay. Before deciding on an interest rate scheme, it’s best to match offers from various lenders. There are lenders promising loans with interest rates but think twice before signing that loan agreement.
Lower repo rates will help reduce the loan interest rates
The RBI is not solely liable for anything that happens with a home loan. The repo rate shifts that the RBI makes from time to time are one big way the RBI affects home loans. In basic terms, the repo rate is the rate at which the RBI lends money to commercial banks, and when the latter lowers the rate, banks and financial institutions must make the requisite adjustments to move the savings on to their customers. To be sure, RBI’s key goal is to bring policies into effect and, to some degree, execute them.
Since the top myths have been debunked, you can apply online with a home loan app in a few easy steps.