Not all have background even close to economics or finance, and with ever increasing in the number of plans and schemes available to borrowers it is only natural that a lot of myths surround the truth. It is important to know the ground reality and make a wise decision accordingly. As such the principal of a home loan is a huge amount of money, unlike other loans. Therefore, it is important to learn about it that is to be learned and clear yourself from any myth that wanders in your mind.
Myth 1: The best time period for any home loan is either shortest or longest one
There is a reason why this myth exists. In the first case, people think that they will need to pay less interest, which is in fact, true .But they often miscalculate the fact they will have to pay higher EMI which increases the risk of default. On the other hand, Long duration lovers often in the name of being safe than sorry forget that long-term costs much more interest than they would want to pay out.
The best way to deal with it is to use a home loan EMI calculator. It gives you a quick check on the EMI that you will have to pay and graph that depicts the interest and principal to be paid. You can visit https://www.upwardly.in/emi-calculator, it’s one of the best caculators available online.
Myth 2: Floating rates are better avoided
It is subjected to the type of market. In many cases, it turns out that the fixed rate borrowers are at a loss when the rate in the market goes down. It is therefore important to evaluate the situation and then select the best option available at disposal.
Myth 3: Increase in rates will increase my EMI payment
Any change in the rate is undoubtedly reflected in your loan amount, but lenders do all sorts of calculation to make sure that your home loan EMI remains the same. The increase in value is usually done by increasing the number of terms.
Myth 4: Refinancing your term is not an option
In case you get to know of a bank that is offering a lower interest rate than your current one than it is rather a time to refinance with your bank and reduce your EMI
Myth 5: Prepayment can be havoc
In earlier times, it was indeed the case. But with present instructions of RBI, the extra tax that was used to levy on prepayment has been lifted. So you can prepay your loans without any hesitation.
Myth 6: Tax deduction scheme of Home loan
One of the major attractions of the home loan was a tax deduction. It is rather a subjective matter, and an individual must weigh all the possibilities to ensure that he or she gets benefited from the scheme.
Myth 7: RBI fixes the home loan rate
Even though RBI increase or decrease the home loan rate, but there are provisions to make minor amendments, and therefore they can decide the rate as per the requirement.