Debunking 4 Home Loan Myths - Home Loan Blog - Tata Capital

4 Home Loans Myths that Need to be Buried Right Away

May 23, 2017

When it comes to home loans, everybody has an opinion. But not always are those opinions based on facts. Infact at times, these opinions can lead to formation myths that become quite popular.

So let’s try to see the reality behind some popular home loan myths:

  • You must have heard about the rate hikes by RBI. People generally are afraid of these rate hikes, as they believe that it will necessarily increase their home loan rates. In reality, a policy rate hike doesn’t always mean a hike in loan rates or EMIs. Infact, whenever the rates are hiked by lenders, they first of all extent the loan tenure without increasing the EMI.
  • Another myth is that Pre-payment always attracts penalty. That is not true. Most lenders allow about 25% of the outstanding loan amount to be prepaid in a financial year without any significant penalty. In case the amount being prepaid exceeds the 25% limit (of outstanding amount), the lenders may charge anything from 2% to 4% of the amount above 25% limit. So if you are planning to make small prepayments and are afraid of extra charges, then don’t be.
  • Getting a low interest rate is not helpful always. Suppose you need Rs 50 lac home loan. There is a lender who is offering a maximum loan of Rs 30 lac at 9.5%. But there is another lender who is willing to fund full Rs 50 lac at 10.1%. So obviously, having just the low rate is not sufficient. You first want to get atleast the money you want.
  • Having a good credit score is not enough. If your current income is not sufficient for the loan your have applied for, your loan application can be rejected even if your past credit score is good.