Everybody wishes to own their “Dream Home”, but this wish requires determination to become a reality. However, today, realising this dream is much easier than before with the help of a Home Loan. One can also enjoy several tax benefits with a Home Loan and leverage it to purchase a residential property.
But like various other financial tools, Home Loans have many myths circling them too. And many people get misguided by these myths and suffer consequences. So, let’s look at some of the most prevalent myths about Home Loans in this article.
First Off, what is a Home Loan?
A Home Loan is a sum of money borrowed from a lender to purchase a property (which can be either a residential flat or a piece of land) which is kept as collateral till the loan gets cleared. The lender usually covers up to 90% of the cost of buying a property. At the same time, the remainder must be paid as a down payment by the individual intending to buy the property.
Major Myths Surrounding Home Loans
Following are some home loan myths; let’s bust them one by one below -
Myth 1 - House Loans Come with a High-Interest Rate:
Fact - The interest rates on Home Loans are a function of credit tenure. The longer the time taken for repayment, the higher the interest rate. One can get a home loan from Tata Capital of up to Rs. 5 Crore with an interest rate starting at just 7.75%.
Myth 2 - Borrowers are Always Penalised for Prepayment of Loans:
Fact - This is not true. It varies from financier to financier. For instance, in the case of home loans disbursed by Tata Capital, no prepayment charges are levied in case of floating interest rates; however, in case the customer opts for fixed interest, then charges may apply for repaying the loan before the completion of the tenure.
Myth 3 - RBI determines Interest Rates on Home Loans:
Fact - Yet another myth circulating about Home Loans is that RBI fixes the interest rates of Home Loans. Although the central bank determines the key rates, lenders decide the final interest rate based on several factors. And due to this, different lenders charge different Home Loan interest rates and give the borrowers numerous options.
Myth 4 - Short Tenure Home Loans are Better:
Fact - Most people have this misconception that the sooner they get themselves free from the repayment schedule of their Home Loans, the better it will be for them, as they will have to pay lesser interest amounts.
But people fail to realise that with the shorter tenure, they will also have to give higher Evaluated Monthly Instalments (EMIs). High EMIs may become difficult to pay at a point in time, and payment failure may attract punitive measures from the lender. Thus, an individual must determine the tenure of the Home Loan depending on their assets, job stability, earnings, and future goals.
Myth 5 - Credit Score is the Only Basis Used for Issuance of Home Loans:
Fact - Although a good credit score does help verify the creditworthiness of the individual, it’s not the only factor determining whether an individual’s loan would be approved. Other than a good credit score, other factors that affect a person’s eligibility for a home loan include job stability, the status of employment, financial liabilities, age, etc.
All You Need to Know About Home Loan Offered by Tata Capital:
Tata Capital, the flagship financial arm of the Tata Group, offers a wide array of Home Loans to meet different requirements of customers. One can get a Home Loan from Tata Capital for various home-related reasons other than purchasing a built residential property. One can get it for the purchase of a plot of land for construction, remodelling of the house, and home extension.
One can get a Tata Capital Home Loan for an amount ranging from Rs. 5 Lakh to Rs. 5 Crore, depending upon the borrower's requirement, for a tenure of up to 30 years. The NBFC also allows loan repayment through low monthly instalments, which can be increased or decreased according to the borrower’s convenience. Till date, Tata Capital has disbursed loans worth over Rs. 4.5 Lakh Crore and is serving as the financial friend to more than 15 Lakh customers. Its success in the domain can be attributed to its easy application process, minimal documentation requirement, and full after-sales services.