One of the main things to think about when you are planning to buy an apartment is the home loan. Unfortunately, there are many myths and misconceptions associated with homes loans. Here’s a look at some common ones:
Low Interest Rates
People get more attracted to banks or NBFCs that claim to offer low interest rates on loans. However, you must read the fine print in the document carefully as there might be hidden charges included in it that would actually make you end up paying a lot more! Some of these charges could include hefty legal valuation fees, processing fees, pre-payment penalties, etc.
High Interest Rates Mean hefty EMIs
When banks charge higher interest rates on home loans, they usually provide charge smaller EMIs stretched over a longer period of time, making repayments easier for the borrower. Interest rates are also dependent on the borrower’s age – interest rates are usually brought down for younger borrowers with good incomes.
Fixed rates vs. Floating Rates
Don’t fall for the myth that fixed interest rates are better than floating interest rates on the home loan. Fixed rates don’t necessarily mean that it will remain the same for the entire tenure of the loan. The rate remains fixed only for a certain period of time, and after that it becomes dependent on the prevailing rates!
Pre-payment and Penalty Charges
Contrary to popular belief, pre-payment doesn’t always lead to penalty charges. Its only applicable for the initial few years and may gone down over the length of the tenure, depending on the bank. Banks usually allow pre-payments up to 25% of the outstanding amount per financial year, with 2-4% charges if the amount is more.
Another myth going around is that banks aren’t concerned about the borrower’s employment status. On the contrary, the bank needs to be kept updated about employment status, unemployment phase or retirement.
High CIBIL Score
A high CIBIL score isn’t the only eligibility criteria for home loan approval. There are multiple factors other than your credit score that determine your eligibility so ensure you fulfill all the requirements.
To ensure approval, don’t depend on myths, but find out all the correct details pertaining to a home loan before applying for one!