The Biggest Home Loan Myths
Everyone wishes to own their “dream house”, but this wish requires determination to become a reality. However, today fulfilling this dream is much easier than before with the help of a home loan. One can also take advantage of several tax advantages with a home loan and take advantage of it to buy a residential property.
But like various other financial tools, home loans are also shrouded in many myths. And many people are misled by these myths and suffer the consequences. So, let’s look at some of the most common home loan myths in this article.
First of all, what is a home loan?
A home loan is a sum of money borrowed from a lender to purchase a property (which can be a residential apartment or land) which is held as collateral until the loan is repaid. The lender generally covers up to 90% of the cost of buying a property. At the same time, the remainder must be paid as a deposit by the individual intending to purchase the property.
Top Myths Surrounding Home Loans
Here are some myths about home loans; Let’s break them out one by one below –
Myth 1 – Home loans come with a high interest rate:
Fact – Interest rates on home loans are based on the term of the loan. The longer the repayment period, the higher the interest rate. One can get a home loan from Tata Capital of up to Rs. 5 Crore with an interest rate starting from just 7.75%.
Myth 2 – Borrowers are always penalized for prepaying loans:
Fact – This is not true. This varies from one financier to another. For example, in the case of home loans disbursed by Tata Capital, no prepayment charge is levied in case of floating interest rates; however, if the client opts for fixed interest, fees may apply for repayment of the loan before the end of the mandate.
Myth 3 – RBI determines interest rates on home loans:
Reality – Another myth going around about home loans is that RBI fixes interest rates on home loans. Although the central bank determines the policy rates, lenders decide the final interest rate based on several factors. And for this reason, different lenders charge different interest rates on home loans and provide borrowers with many options.
Myth 4 – Short-term home loans are better:
Fact – Most people have this misconception that the sooner they break free from their home loan repayment schedule, the better it will be for them because they will have to pay less interest.
But people don’t realize that with a shorter term, they will also have to pay higher Assessed Monthly Payments (EMIs). High EMIs can become difficult to pay at some point, and failure to pay can result in punitive action by the lender. Thus, an individual should determine the term of the home loan based on their assets, job stability, income, and future goals.
Myth 5 – Credit score is the only basis used for issuing home loans:
Fact – Although a good credit rating helps verify an individual’s creditworthiness, it is not the only determining factor in whether an individual’s loan would be approved. Apart from a good credit rating, other factors that affect a person’s eligibility for a home loan include job stability, employment status, financial liabilities, age, etc.
Everything you need to know about the home loan offered by Tata Capital:
Tata Capital, the flagship financial arm of the Tata Group, offers a wide range of home loans to meet different customer requirements. One can get a home loan from Tata Capital for a variety of home-related reasons other than buying a constructed residential property. It can be obtained for the purchase of land for construction, renovation of the house and extension of the house.
One can obtain a Tata Capital home loan for an amount ranging from Rs. 5 Lakh to Rs. 5 Crore, depending on the needs of the borrower, for a term of up to 30 years. The NBFC also allows the repayment of the loan by low monthly installments, which can be increased or decreased according to the convenience of the borrower. Till date, Tata Capital has disbursed loans worth more than Rs. 4.5 Lakh Crore and serves as a financial friend to more than 15 Lakh clients. Its success in the field can be attributed to its straightforward application process, minimal documentation requirements, and comprehensive after-sales services.