Nothing can beat the ecstasy of purchasing a new home, especially when you have dreamt of it for long. Moreover, getting a new house and decorating it as per preferences is now easier than ever with banks and NBFCs offering low-interest financial support to the prospective buyers. Then again, applying for a home loan is easy, provided you can debunk the prevalently pursued myths, which are creating a sense of misinformation, in and around the home buying circuit.
In the subsequent sections, we shall bust 5 of the common home loan myths that can make your decision prone to errors. Moreover, with this being a high-value credit line, there isn’t any room for misjudgment, especially when you are on the brink of taking a plunge:
It Would Help If You Opted For Lower Interest Rates
Probably unexpected, lower interest rates aren’t as resourceful as people consider them to be. Most of us fail to understand that lower interest rates can negatively impact the LTV or Loan-to-Value ratio! Therefore, in case you opt for banks or NBFCs offering the lowest possible home loan rates, the chances of getting cent percent or even 80 percent financing become complicated, and you end up shelling out a significant sum as a down payment.
Shorter Loan Tenures are Better
One of the more common home loan myths is to consider shorter tenures for becoming debt-free, faster than usual. While a shorter tenure has its advantages, including lesser cumulative interest, it isn’t the best choice for a salaried individual. Shorter tenure means steeper EMIs, which hinder your ability to save money for emergencies. Therefore, the best approach is to opt for the middle ground, comprising standard tenure and mid-range home loan rates.
Lower Credit Scores Will Disqualify You.
Loan seekers with below-average credit scores often refrain from applying for a home loan, out of skepticism, and fear surrounding rejections. They fail to understand that certain housing finance companies offer loans, despite lower credit scores. However, the interest rates are usually on the higher side, barring the likes of PNB home loan interest rate, which is still quite competitive and affordable, despite catering to individuals with sub-par credit histories and scores.
Fixed Rates are Better
While individuals end up vouching for fixed home loan interest rates to minimize hassles and ensure that a fixed EMI is charged each month, floating rates are mostly better if you are looking to make significant savings during the entire loan tenure.
Foreclosing Attracts Penalties
While certain banks and NBFCs used to charge prepayment penalties before, RBI has disallowed financial institutions to hinder your willingness to foreclose, especially on loans calculated at floating rates, including the PNB home loan interest rate.
Purchasing a home without compromising financial sustainability is the most important consideration for salaried and even self-employed individuals. However, it would help if you steered clear of these homes mentioned above loan myths for minimizing critical errors.