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13 Common Home Loan Myths That Must be Known

21 Aug 2025

13 Common Home Loan Myths That Must Be Known

Own house stands as one of the strongest pillars in this sociocultural dynamic, as it represents the identity of a family and embeds a person in a society. Affordable housing finance institutions like Wonder Home Finance - Home Loan In Hassan step in as a stable aid, providing easy home loans at reasonable interest rates and customizable EMI options. One of the main constraints in this process is the applicant's lack of awareness in this domain. This incomplete knowledge can lead to the applicant believing in false home loan claims in Hassan that will hamper the decision-making process. Listed below are the common false conceptions regarding home loans.

Also read: - All You Need to Know About Home Loan Credit Score

13 Must-Know Home Loan Myths

Home Loans are expensive: One of the frequently heard home loan myths is that they are very costly. The Government of India has given special consideration to providing houses to all the citizens from all sections of society. So, when compared with other loan types, a home loan comes out to be cheap and affordable.
High Interest Rates can lead to increased Home Loan EMIs: It is commonly believed that a high home loan interest rate will yield increased home loan EMIs. It is not completely true. In case of high home loan interest rates, lenders offer flexible home loan tenure to ease out EMI burden. Wonder Home Finance facilitates its customers with flexible home loan tenure of up to 20 years. To get a favourable home loan interest rate, the applicant must ensure a stable income, a good credit score and a low debt-to-income ratio.
Always go for Short-Term Home Loan: The thought that one will be debt-free at the earliest with minimum interest outgo seems attractive, making the short-term home loan the obvious choice. However, it comes out to be very expensive as the EMIs can become too high, which makes them unaffordable for the middle-income groups. The increased home loan EMIs sometimes make the monthly payment difficult and may lead to payment default. Such a delay must be avoided as it leads to penalties and reflects poorly on the credit report.
Low Home Loan Interest Rates are the best: Although a low home loan interest rate on a home loan may seem attractive, it's important to be cautious and not be swayed by this alone. It's possible that a low home loan interest rate could come with other hidden charges, which can make your overall monthly expenses quite costly. Therefore, it's crucial to carefully read and understand your loan agreement before deciding on whether or not to proceed with the loan.
Fixed interest rate is better than a floating interest rate: It is frequently heard that a fixed interest rate must be chosen at the beginning of the home loan term. The home loan interest rate doesn't need to remain constant throughout the loan term. After a period, even a fixed rate is subject to a money market clause and the resetting of the interest rate.
Home Loan Interest Rates are fixed by RBI: Many first-time applicants believe that the RBI directly sets home loan interest rates for individuals. The RBI sets the broad market interest rate and guidelines for the lenders. These rates vary from time to time.
Lending institutions are not concerned about Home Loan Applicant’s Employment: New home loan applicants believe that home loan lenders are indifferent towards the borrower’s employment status. Again, such a notion is untrue, as the applicant’s current employment is one of the foremost things that lending services make a note of. Probable fraud, the ability to pay the principal amount, borrower’s creditworthiness are a few points that lenders keep in mind while considering home loan approval and the applicant’s employment helps them make a check of these. The applicant must keep his/her lender updated with their employment scenario in terms of retirement age, present occupation or unemployment phase of life.
Penalty charges will be levied on prepayment of all Home Loan types. Another frequently believed notion is that the borrower will have to pay a penalty charge on the prepayment of all home loan types. It is not always true. Sometimes, prepayment charges might be imposed based on the type of home loan availed or the purpose it is used for. Prepayment penalties may vary from lender to lender and may be subject to terms and conditions. Refer to Wonder Home Finance's schedule of charges for more information.
It is best to choose a Prepayment facility: Opposite to popular belief, this is a common misconception. Prepayment is only helpful during the early years of the loan term. Also, sometimes a prepayment penalty might be exacted by the lender on a home loan prepayment. Moreover, you can seek a deduction of up to 1.5 lakh on repayment of the home loan principal amount under section 80C of the Income Tax Act.
Only the credit score is essential for Home Loan Approval: An applicant’s credit score is a crucial benchmark in deciding approval of a home loan, but it is not the only factor. It is a three-digit score that determines the applicant’s creditworthiness and the capacity to repay the loan. It is highly misunderstood that this is the sole eligibility criterion for a home loan. Other essential factors concerning a lender are the applicant’s employment status, stability of annual income, age, and the property’s location used as collateral. The documents submitted along with these determiners are also assessed before approval of a home loan.
The borrower is not responsible for Property Insurance: Many loan agreements mention that the property in question must be protected against all sorts of fatalities, and to provide that they might add property insurance to the amount borrowed. The borrower will have to pay some amount in the form of monthly instalments. The borrower must agree to all the clauses related to it to avoid unanticipated expenses. If the property is met with any kind of calamity, then the borrower will have to face a monetary burden if the mortgaged property is not insured.
The Title of the Property is authenticated after getting a Home Loan: Another myth is that the title of the property is validated when a home loan is approved. Although lenders properly scrutinise the documents of the property before disbursing a loan, it must not be considered as a stamp of validation, and due diligence must be maintained by the applicant on their part.
Tax Benefits can be availed only through Home Loans: Home loan borrowers can avail of tax benefits on principal and the interest payable. Because of this provision, people assume that only home loans can help them save on taxes. But it is not true. Many schemes and investment programs ensure tax reductions and savings. Taking a home loan is an important responsibility that must only be opted for when there is a genuine need, and not simply for tax benefits.

Conclusion

On the path to home ownership, a home loan becomes imperative. Utmost caution must be taken during the whole process. Knowing common misconceptions about home loans is crucial as it will prevent faulty judgment in future. With this exhaustive list of misconceptions, you can avoid confusion and make wise financial decisions. Seek Wonder Home Finance - Home Loan In Hassan for expert home loan advice.

FAQs for More Insight

Is it true that you need a perfect credit score to qualify for a home loan?
Wonder Home Finance offers home loans at affordable interest rates, which vary from applicant to applicant based on several factors such as loan amount required, documents available, down payment, and EMI preferred, etc., along with a good credit score.

Is it necessary to have a co-applicant for a Home Purchase Loan?
Having a co-applicant can improve your eligibility for a higher loan amount. Spouses or immediate family members are common co-applicants.

How to improve Home Loan eligibility?
By making note of the following points, you can enhance Home Loan eligibility:

Making a family member your loan’s co-applicant.
Ensuring a stable income, uniform savings, and investments.
Disclosing information on additional income sources.
Taking necessary steps to improve poor credit scores, such as timely repayment of your dues.
On-time repayment of ongoing loans and short-term debts.

Disclaimer
The information provided in this article is for general reference purposes only and should not be construed as professional financial advice. We explicitly disclaim any liability for any decisions made or actions taken based on the information provided in this article. Users are solely responsible for verifying the accuracy and applicability of the information before relying.

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