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Home loan is a long-term commitment, hence one must commit after much consideration. As much it is important to know the factors for home loan eligibility, it is equally important to pay attention to some of the misconceptions surrounding it. These misconceptions arise due to our ignorance, half-baked information that we receive from people, incomplete or asterisked information, and lack of information on the internet when we apply for a home loan online. On the hindsight, ignorance of a potential borrower actually turns to be bliss for the banks and Housing Finance Company. This is so because the more well-informed you are, the more questions you will pose to the bank or Housing Finance Company! However, here are few misconceptions that people generally have regarding home loan.
- High CIBIL score will guarantee home loan approval – High CIBIL score is certainly one of the criteria for home loan eligibility but it does not guarantee an approval of the home loan. CIBIL score is dependent on many factors, and if there is a discrepancy between income and CIBIL score, it may hinder in getting approvals.
- Longer loan tenure is good because of lower EMI – This is the sales pitch you will come across most of the time when you apply home loan. This is nothing but a way to increase interest income by the bank because lower EMI means more repayment transactions. Hence, it is advisable to keep the EMI as high as possible so that loan tenure and your payouts decrease accordingly.
- Tax deductions for home loans – It isn’t incorrect that by taking a home loan you can avail tax deductions. But, at the same time, one must understand that it may be financially beneficial for those who fall in a high tax bracket. Often, this pitch is put across to convince people to take home loans, paying heed to which might not be a wise move always, considering its subjectivity.
- Interest rate of home loans is fixed by RBI – RBI is not directly involved in fixing the interest rate for the home It only formulates the policy that increases or decreases the cost of funding for banks. In the event of a shortfall of funds, RBI lends money to the commercial banks, which means a bank may or may not borrow from RBI. Hence, don’t be under the misconception that RBI fixes home loan interest rate.
- Bank is responsible for the title of the property – A home loan can be considered as a personal loan and as the loan amount is huge you need to furnish property papers as collateral. But, the buyer remains solely responsible for the title of the property. It is one of the most serious misconceptions among all the other myths and must be taken considered well by the borrower.
- Bank staff can influence or help in getting a home loan approved –Wish it was true! But, unfortunately, that is not the case, instead, bank staff may intimidate you that your home loan may get rejected for various reasons such as not investing on a parallel loan etc. However, you must be aware that the front desk staff who sells you the home loan neither have the authority nor play any role in sanctioning or rejecting a loan. Front desk staff trick the borrower just to achieve their job targets.
Well, in any financial transaction, it is impossible to avoid 100% risk. But, by understanding and acquiring knowledge if the borrower makes an informed and intelligent decision then risks can be mitigated to a large extent. So, when you want to apply home loan it is better to take advice from an expert than from your neighbour!