Misconceptions and Myths of Homeloans
The Internet is a vast, disorderly space with plenty of information floating around. While it offers critical pieces of knowledge on a regular basis, there are also other times when you are fed with misinformation. Home loans are one of the things that truckloads of wrong information — myths in other terms—circling around the web. In this article, we’ll list out some of these and explain how and why these assertions are held in the wrong regard.
1. Low-interest rate loans are the best bargain
This is the biggest myths relating to home loans, not simply because it is not true, but also because a statement like this does not tell you the whole story. Banks are, first and foremost, for-profit organizations, and marketing strategy circles around generating large revenues and enticing more customers. They do this by offers various interesting offers like low-interest rates among others to catch people’s consideration. But, the truth is, in these cases, lenders tend to hide plenty of things in conditions and terms to make up for the money they're supposedly losing out. For Example, they’ll add some extra charges like processing fee, legal valuation fee and prepayment penalty among others. When you pay all aforementioned fees, the lenders likely will be made up most of the money they had otherwise lose through the low-interest offering.
What we suggest: Keep in mind and never simply go for a home loan with low-interest rates. Sensibly analyze the offer at hand and check if there’re additional charges you’re expected to cover.
2. Fixed rate loan is much better than a floating rate home loan
This is a widely believed, one that is not without basis. To begin with, both floating and fixed interest rate home loans have own disadvantages and advantages. While fixed interest rate loan offers an exact EMI figure to yo to pay every month, it does'nt take into account any future decline in interest rates. On another hand, a floating interest rate loan considers changes in market rates and applies changes to the interest a borrower will pay.
What we suggest: It is best that you compare housing loan rates from various lenders before choosing a type of interest rate scheme.
3. Property’s authenticity checks if you get a home loan
This is not necessarily true - not always. Lenders typically look at a number of things and will expect the loan applicant to have done due diligence before applying for a loan. Responsibility to determine a title deed’s legitimacy rests entirely on the borrower as lenders’ main objective is to offer the loan you are looking for. If, say, you’ve your loan approved and turns out the title deed of the property is a farce, you’ll still be required to repay the loan you’ve borrowed.
What we suggest: Always be sure to verify the authenticity of the property you’re buying. Go to your zonal sub-registrar office and get an Encumbrance Certificate for your prospective home. The document lists out any possible obligations - legal, financial, or both - on a property in question. You can also list some legal help to get sorted out for you.
4. You can’t buy a house if you do not have the 20% down payment ready
This might’ve worked a few years ago, but the banking industry of present is far more flexible to permit such things to deter their business. Though it’s essential to have down payment ready when you are applying for a home loan, it's not the end, if you do not have the capital ready. As long as you okay with it, lenders will use the different property of yours as collateral to raise funds. So, when you are repaying your loan, you’ll also be making payments to clear off other debt as well.
What we suggest: You can use the major property you have in your name. This could be a plot of your own to get the required funds ready. If your finances permit you, you can choose to avail a personal loan for the purpose.
5. Refinancing a home loan is not always best
Refinancing a home loan is not best always.In a particular case, the opposite is actually true. These days, every lender has begun offering a home loan balance transfer option, whereas a home loan holder can switch loan from one lender to the other. Nobody could fault your decision if you decided to choose for a lender who is offering a lower rate than your current one.
What we suggest: While it may be a good idea to switch loans if you are not getting the best end of a deal, you should not be hasty with your decision. Before going ahead with the switch, do a discussion with your current lender. Maybe they might even revise the terms of the loan and offer you a lower interest rate agreeable to you.
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