Home loan is a big transaction. It is a facilitator that comes at a cost of commitment. Most applicant however opt for big tenures running into decades. Once a person has opted for a loan, it is not easy to make changes to it. Also, before taking a loan there are ample preparations required to ensure that the financial burden is minimised.
In a large number of cases, people who wish to purchase homes plan years in advance, saving and investing to generate sufficient funds at the time of home purchase.
There is no home loan guide available as such. However there are guidelines which can help a person zero in on the right kind of loan. However there are certain popular assumptions which can be addressed in order to quell misconceptions surrounding home loans. Again no home loan guide clarifies these concepts. Only a few portals choose to reveal similar information.
- “Loan will be sanctioned assuredly”
Ask someone who has just started planning a house purchase. Such person exhibits considerable self assurance in the belief that his/her home purchase is guaranteed because the loan WILL be sanctioned. This is a misconception that runs deep among consumers. Whether one is looking for a loan on a property in Bangalore or Delhi, the process is invariably strict everywhere. This means that all applications are scrutinized in-depth. Only on the basis of a person’s credit worthiness the loan is sanctioned.
- “Previous loans do not matter”
Someone planning to opt for a home loan would do well without any previous pending loans. Previous loans matter because they are crucial in projecting the payment history of an applicant. If a previous loan has been serviced timely, then the credit history of the applicant would be good. If previous loans have not been serviced well, then credit history becomes tarnished. In the latter case, the possibility of acquiring a new loan is reduced drastically. And in case a previous loan is still being serviced, another financial burden is added to the new loan.
- “The bank will provide most of the amount”
This third myth arises from the fact that the banks advertise their ability to pay up to 85% of the home loan. This is the rare case when the paperwork is immaculate and the credit history of an applicant is exceptional. Most of the times, a customer has to make a down payment of AT LEAST 30-35% and the bank sanctions the rest.
- “Balance transfer is always beneficial”
Many consumers believe that after taking a loan, there is an option for balance transfer that could help them save more. It is true that balance transfer options are available, but they are beneficial only in case of availability of better rates. There are also transfer costs which further dilute the benefits. Hence the pros of balance transfers vary- depending upon availability of a sharp contrast in interest rates of 2 banks.
- “Borrowing costs ? They are not that important”
Many home owners who plan to invest in property many times ignore the borrowing costs of a loan. These costs can easily decrease profit margins on an investment.
It is important to consider all pros and cons of home loans before opting for one. This would help avoid future financial losses.