There are many myths around home loans that keep people from applying for it to buy a new property or refinance it. The nine most common home loan myths are as follows:
Myth #1: Rents are cheaper than paying home loan EMIs
This is the most common myth that renting is cheaper than paying home loan EMI’s, though the truth is contrary to it. Housing prices have dropped to a great extent, and this is the ideal time to purchase properties. Before deciding to purchase a house or the property, you should evaluate the advantages and disadvantages of both the options before declaring that you cannot afford a home.
Myth #2: Short sale can’t be managed with a home loan
The second most common myth is that foreclosed property cannot be financed through home loans, which is again not true. Home loans include foreclosed and short sale properties. Apart from foreclosed properties, you can also buy a condominium, town house, and a complete or incomplete house through home loans. It is also applicable to a loan taken to renovate your house for energy efficiency.
Myth #3: More assets can enable you to have more home loan
Since, your assets are not considered equal to your salary, they cannot be used to get more home loan. Salary is the best proof of regular income and the lenders prefer applicants with regular source of income.
Myth #4: Cheaper home loan interest rates are financially better for you
It is observed that attention grabbing cheaper rates often accompany higher processing fee and little or no repayment flexibility.
Myth #5: Lower EMI is always the best
It is also among the most common myths that home loan with lower EMI is always the best option for you. The only solution is to make more regular payments towards your home loan, which can reduce your overall interest and then quickly help finish the mortgage.
Myth #6:Fixed interest rate is always better adjustable
Nowadays adjustable and variable interest rates are quite low because of the global economic slowdown, so the fixed rates are not the wise option at the moment. Worldwide, variable interest rates are considered to be cheaper than the fixed rates. So, you should weigh your options in details before choosing the right mortgage.
Myth #7: You need to necessarily make a down payment to get a home loan
You don’t necessarily need to make a deposit of 10% or 20% as down payment to avail a home loan. In fact, 100% finance is available right from the beginning, but it might mean a higher interest rate and processing fee.
Myth #8: With 100% home loan you don’t need to pay anything
This is entirely untrue in the real world, as you would have to pay for stamp, legal charges, insurance, inspection and moving in costs. So, you always have to keep aside some “working capital” (with you) even if you are going with the “100%” finance.
Myth #9: Refinance is unreasonably expensive
It’s the strategy of lenders to make refinance appear difficult to the borrower to keep him off it. By refinancing carefully, you can save thousands of dollars till the repayment is complete. If you do a little window shopping in the banks and financial units, you’d be surprised to know the attractive refinancing rates.
However, most lenders offer 90% of the value of the property, taking advantage of Bad credit emergency loan, which means you have to pay the remaining 10% as a down payment. This amount may vary depending on the value of the property. So if the value of your property is higher, the down payment will increase accordingly. It can make things a bit more difficult if you don’t have enough funds in your bank account.