5 Myths About Home Loans in India

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5 Myths About Home Loans in India
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5Common Misconceptions About Home Loans in India

• Myth 1 To Close The Home Loan Account Soon, The
  Shortest Tenure Must Be Chosen
• Myth Debunked When you opt for a home with
  fluctuating interest rates, you can expect it to
  go up or down, just like the stock prices.
  Keeping this in mind, some borrowers choose the
  shortest tenure possible. If you too are thinking
  of doing the same, you will be making a major
  mistake. Paying off the loan in a short tenure
  means higher EMI, thus reducing the liquidity in
  the bank account of the borrower. This means that
  the borrower will not be able to make any other
  major investments. Furthermore, higher EMI might
  be difficult to pay, and the borrower might
  default the payment of the EMI. One of the best
  decisions is to choose a longer loan tenure.

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• Myth 2 Higher the Interest Rate, Higher Will Be
  the EMIs
• Myth Debunked When the interest rates are raised
  by the government, borrowers generally have a
  perception that they will have to pay increased
  EMIs too. This, however, is not true. Generally,
  with an increase in the interest rates, the bank
  increases the tenure of the home loan, so that
  the borrower does not get burdened with the EMI.
  However, this decision is influenced by a few
  factors like the borrowers age, present income,
  and his/her ability to repay the loan. In case,
  you wish to increase your EMIs and keep the
  tenure the same, you can inform the same to the
  bank.

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• Myth 3 Fixed Rates Are Better than Floating
  Rates
• Myth Debunked Many people often think that a
  fixed rate of interest is better than a floating
  rate of interest. This is a big misconception
  among people. Which rate of interest is better
  depends on the prevailing market scenario.
  Floating rates depend on factors like Marginal
  Standing Facility (MSF), repo rate, and Statutory
  Liquidity Ratio (SLR), while it is not the case
  with fixed rates. Contrary to the belief that
  fixed rates are better than floating rates, both
  the interest rates can be beneficial. If the
  interest rates fall, the borrower paying a fixed
  rate comes at a loss, whereas, the same situation
  becomes beneficial for a borrower who opted for
  floating rate of interest.

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• Myth 4 Loan Must Not Be Refinanced
• Myth Debunked Another myth related to homes
  loans is that one should not refinance a loan. If
  you a find a bank offering lower interest rate
  than the bank you have already chosen, you can
  always opt to refinance your loan. This is a
  great way to lower your EMI. Furthermore, you can
  also get the tenure of your loan changed, and can
  even make changes in the rate of interest too.

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• Myth 5 Banks Charge Heavy Penalty on
  Prepayment/Foreclosure of Home Loans
• Myth Debunked Earlier, banks used to charge a
  penalty on prepayment/foreclosure of Home Loan
  India. According to the new RBI notifications,
  banks cannot charge any penalty (as prepayment
  charges) from the loan borrower. This means that
  in case you are planning to prepay the loan
  amount, you can do so, without paying any penalty
  for the same.

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Source http//www.biz2credit.in/blog/2015/07/31/5
-myths-about-home-loans-in-india/
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