Taking out a home loan is one of the most vital steps towards buying a home and fulfilling the dream of becoming a homeowner. With everything that is important and big, everyone seems to have an opinion about it and the home loan industry is also not an exception. It is sad enough to note that the entire home loan industry is fraught with myths and there are too many homeowners who have believed in such myths. Believing in the myths bar you from making the best possible decision about getting home loans as what you trust in, is actually fake. Hence, it is important for you to avoid trusting on the age-old myths associated with home loans. Here are some of them.
- The best deal is the one with the best interest rate
No, this is not always true. It is not that you only need to check the interest rate of the home loan from lenders such NPBS before taking it as there are some other terms and conditions too that you need to check. Apart from the interest rate, there are things like the APR of the loan, repayment term, and closing costs which needs to be considered. Also check out the prepayment penalty, valuation costs, processing fee apart from the interest rate. Beware that a deal might initially look tempting but it can have higher hidden fees later on.
- It is a must to pay down 20% of the home loan
Although it is true that mortgage lenders demand a 20% down payment of the buying cost of the loan but that doesn’t mean that you HAVE to pay down this amount in order to get a mortgage loan. If you can pay down 20%, you won’t qualify for the PMIs or the Private Mortgage Insurance payments. However, in case you didn’t save enough money and you’re unable to pay the 20%, you will still get a mortgage but with the PMIs added to it.
- A poor credit score will always bar you from getting a mortgage
Just like the other myths, one more myth to stop believing in is that a bad credit score won’t get you a mortgage. Majority of the lenders will consider you as a less dependent borrower since you have a poor credit score. People with higher credit scores usually tend to qualify for lower interest rates. However, that doesn’t mean that you can’t get a mortgage with a low score.
- Extending the loan term will save you more money
All this depends on the timeframe of the loan and how long you’re going to carry the loan. Extending the term of the loan usually increases the time throughout which you have to repay the loan. This will also mean that you will have to pay more on interest rates through a longer period of time. This is a wrong notion as you will end up paying more than what you owed actually.
Taking out a home loan is a big responsibility so you should assess it carefully but that doesn’t include believing on myths associated with buying a house. Be sure to compare loans on Money Supermarket before taking the plunge.
Are you currently a homeowner? Did you believe any of the above myths prior to getting a home loan? Tell us!
Leave us a comment!