Buying a home is not an easy task these days. With skyrocketing property prices, only a home loan can fulfill your dream. However, many misconceptions about home loans persist, and if you don't understand them, you'll suffer losses later. Here's the truth about 7 such misconceptions.

1. A loan with a lower EMI and a lower interest rate is better.
This is a common myth about home loans. Is a lower EMI always beneficial? Not necessarily. For example, a 30-year loan will have a significantly lower EMI than a 20-year loan, but the longer term means you'll pay more interest over the entire loan period.

The second question is: are lower interest rates always better? Generally, yes, but you should consider the total cost. Some banks offer lower interest rates initially, but interest rates don't reset quickly based on the repo rate. This means that even if market interest rates fall, you may not benefit from them. Additionally, some lenders offer low interest rates but charge high prepayment fees. Therefore, it's wiser to focus on the total cost, not just the interest rate.

2. No Prepayment Charges on Home Loans
It's a common misconception that home loans don't have prepayment charges. In fact, the RBI has exempted only floating-rate home loans from prepayment charges. Banks can still charge prepayment charges on fixed-rate loans. Even floating-rate loans may have an initial lock-in period or partial prepayment limit.

3. A good CIBIL score guarantees loan approval
A CIBIL score above 750 is good, but it doesn't guarantee a home loan. Banks don't just look at the score, but also consider factors like your income, job stability, age, loan-to-value ratio, and property location. Even if your CIBIL score is low, but other factors are strong, you may still get a loan.

4. Prepayment eliminates tax benefits
This is partially true, but partially false. Yes, you lose the tax benefit on interest after prepayment, but remember that most of the interest is paid in the initial EMI of the loan. After 10-12 years, most of the principal remains. In this situation, prepayment makes you a stress-free property owner and also improves your credit score.

5. RBI sets home loan interest rates
Many people believe that the RBI sets home loan interest rates. In reality, the RBI only sets the repo rate. Banks set interest rates based on their funding costs. Two people can get loans at different interest rates from any given bank, depending on their credit profiles.

6. It's best to take a home loan at a younger age
It's true that when you take a home loan at a younger age, you get a longer tenure and lower EMIs. But this isn't the only problem. It takes some time for most people to stabilize their careers and decide which city they want to settle in. Buying a home doesn't make sense if you have to leave later. Therefore, before deciding on a home loan, it's best to wait a few years and decide where you want to settle. It's wise to live in the house you're building.

7. Fixed interest rate loans are always beneficial.
While most people consider fixed-rate loans to be preferable, the truth is that they don't benefit from market interest rate fluctuations. Furthermore, many "fixed loans" also have clauses that banks can revise at any time.

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