Buying a home is not an easy task. It takes your savings, your time, and a lot of analysis to understand and choose a property that you want to buy. Adding to that the cost of homes these days, it has become imperative for the common man to consider taking a home loan. But with so much paperwork and a lack of understanding, it often becomes a grueling task with several myths discouraging us from the prospect of buying a home.
A lot of people tend to follow this myth and end up regretting it in the long run. A lot of buyers tend to go for a home loan with the shortest possible tenure in order to let it close soon. But with a shorter period comes higher EMIs which end up as lower liquidity in their accounts. This reduces their purchasing power for a major investment in the future and may also lead to defaulting on the payment of EMI. Instead, a loan taken for a longer period of time has reduced EMIs leading to a sizeable reduction in burden and it also offers pre-payment facility.
There are various loans available with varied interest rates. You might get attracted to the loans with low-interest rates and end up applying for the same. Another pitfall some people end up falling in is the hype over lowest interest rate. With so many banks offering various loans at about same interest rates, it becomes important to understand your requirements. While it is true that low-interest rates might mean low EMIs, it might not be fruitful if the sanctioned amount does not meet one’s requirements. Hence, using only low-interest rate as the criteria for making the choice may not really be a wise option.
The prevailing market scenario influences loans just like the stock market. People seem to believe that the experience of someone they know can fit in their case when it comes to loans. This is not true as interest rates depend on the income, the ability to pay, and age among other factors. There is no clear winner between fixed and floating rates with both having their merits and demerits.