Buying a house is a dream come true. But, not everyone pays the cash upfront while buying a house. Instead, a lot of people take a home loan to buy their dream house. Home loan is offered by banks and housing finance companies.
As home loan is a long term and most important loan; you must be very careful while availing it. It is very important to make an informed decision while availing the home loan. Make sure you do not make any mistakes because this is a loan which lives with you for a long period of time. So in this blog, we will discuss certain myths on home loans you must be aware of.
While availing home loans, a lot of people look for loans with low-interest rates. But, it is not a wise decision. The low-interest-rate loans might seem attractive, but the down payment will be more in such cases. In case of loans with low-interest rates, you will have to opt for a lower LTV.
The home loan is actually a long term loan. The borrowers will have to pay home loan EMI's for at least 15 years. But, people who are not aware on home loans; believe that it is good to choose a loan with a short tenure. In case you choose loans with short tenure, you will have to pay high Equated Monthly Instalments (EMIs). Paying high EMI's can actually affect your monthly budget and you won't be able to save money for emergencies. So, it is advisable to opt for loans with mid tenure and mid-range interest rates.
The credit score is checked while applying for a home loan. Many applicants with a credit score of less than 750; believe that their home loan application will be rejected and avoid availing the home loan. The fact is banks are very strict on home loans, but you can get a home loan approved by Housing Finance Companies (HFC). HFCs offer home loans to people with low credit scores, but they would charge high-interest rates.
Many people believe the fixed interest rates to be better when compared to floating interest rates and opt for them. But, the floating interest rate is actually better than the fixed interest rates. The floating rates are lower by 1.5% to 2% when compared to the fixed interest rates. This will help save a lot of money over a long tenure. Even if the interest rate fluctuates; it would come down after a while.
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