With rising real estate prices, purchasing a home with your savings can be extremely difficult. A home loan, however, can make this dream more achievable by spreading out the cost over time. Despite this, many potential homeowners hesitate to plunge due to common myths and misunderstandings about home loans.
In this article, we’ll clear up some of the most widespread misconceptions, helping you make an informed and confident decision regarding securing a home loan.
What are the common misconceptions?
● A high credit score is all that matters: While a strong credit score is important and often results in better home loan interest rates, lenders also consider other factors. These include your income level, job stability, and existing debts. Even if your credit score is average, you may still qualify for a home loan, though you might face higher interest rates or be required to make a larger down payment.
● Home loan interest rates are different for different people: Home loan interest rates depend on factors such as credit score and loan amount, as well as the lender’s policies and tenure options available to you. Some borrowers, with credit scores and consistent income, may secure rates compared to those considered a higher risk, who might face slightly higher interest charges. Moreover, depending on your circumstances, you can opt for either fixed or variable interest rates.
● Having income guarantees loan approval: Income is just one part of the equation. Lenders also evaluate other factors, such as your existing debts and credit history, before approving a loan. To qualify, it’s important to maintain a healthy debt-to-income ratio, ensuring that your monthly EMI payments don’t exceed 40% of your income.
● Home Loans are only for buying property: Home loans offer flexibility for building a home from scratch, renovating an existing one, and even refinancing existing loans to lower interest rates or extend repayment terms for more manageable monthly payments. Consider applying with your bank to get the deal available to you. Different lenders have unique interest rates and fee structures to consider when comparing options for the most advantageous terms based on factors such as loan duration and associated charges for early repayment.
● You need to pay a 20% down payment: While it’s commonly believed that a 20% down payment is required to buy a house, this isn’t always the case. Some lenders may accept a lower down payment, even as low as 10%. However, a smaller down payment could increase fees and interest rates. It’s important to evaluate your financial situation carefully and balance the down payment and monthly instalments to avoid financial strain.
● The Lowest Interest Rate is Always the Best Deal: While a low interest rate might seem like the best deal, it’s crucial to consider the full cost of the loan. Hidden charges such as processing fees, foreclosure charges, and other associated costs can significantly impact your loan’s overall cost. When comparing offers, it’s important to factor in these additional expenses and the lender’s reputation.
● Home Loan Insurance is Mandatory: Home loan insurance is often recommended but is not mandatory. It typically covers the outstanding loan balance in the event of the borrower’s unexpected death, offering financial protection for the borrower’s family. However, the insurance cost should be carefully considered before committing, as it adds to the overall cost of the loan.
Key considerations to keep in mind when seeking a mortgage for your home
● Credit Score: A score of 750 or higher is ideal for securing favourable terms.
● Debt-to-Income Ratio: Ensure your monthly loan payments do not exceed 40% of your income.
● Loan Tenure: A longer tenure may result in lower monthly payments but higher interest over time.
● Interest Rate: Choose fixed or floating rates based on your financial preference.
● Additional Fees: Be aware of processing fees, foreclosure charges, and hidden costs.
Conclusion
Don’t let myths and misconceptions prevent you from making an informed decision about securing a home loan. Understanding the qualifications, interest rates, and associated costs will help you find the best loan offer for your needs. Take the time to research and compare lenders to ensure you choose the most suitable option for your financial goals.
Disclaimer:
CBD:
Qrius does not provide medical advice.
The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) outlaws the recreational use of cannabis products in India. CBD oil, manufactured under a license issued by the Drugs and Cosmetics Act, 1940, can be legally used in India for medicinal purposes only with a prescription, subject to specific conditions. Kindly refer to the legalities here.
The information on this website is for informational purposes only and is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or another qualified health provider with any questions regarding a medical condition or treatment. Never disregard professional medical advice or delay seeking it because of something you have read on this website.
Gambling:
As per the Public Gambling Act of 1867, all Indian states, except Goa, Daman, and Sikkim, prohibit gambling. Land-based casinos are legalized in Goa and Daman under the Goa, Daman and Diu Public Gambling Act 1976. In Sikkim, land-based casinos, online gambling, and e-gaming (games of chance) are legalized under the Sikkim Online Gaming (Regulation) Rules 2009. Only some Indian states have legalized online/regular lotteries, subject to state laws. Refer to the legalities here. Horse racing and betting on horse racing, including online betting, is permitted only in licensed premises in select states. Refer to the 1996 Supreme Court judgment for more information.
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