Buying a home is one of the biggest financial decisions in life, and for most Indians, it begins with taking a home loan. Yet, many people either delay or complicate their decisions due to widespread myths surrounding home loans. These myths can keep you from making informed choices or even cost you extra money.
In this blog, we bust 10 common myths about home loans with facts, examples, and insights. Read on to avoid these mistakes and become a confident borrower.
Myth 1: You Need to Pay 20% as Down Payment Always
Reality: While lenders usually expect you to contribute a minimum of 10% to 20% of the property’s cost as a down payment, it’s not a fixed rule. The exact percentage depends on the Loan-to-Value (LTV) ratio offered by the lender and your creditworthiness.
Example:
If you’re buying a home worth ₹50 lakhs, and your lender offers an LTV of 90%, you may only need ₹5 lakhs as a down payment.
RupeeQ Tip:
Use the RupeeQ EMI calculator to check your ideal loan amount and plan your budget before applying.
Myth 2: Only Salaried People Can Get Home Loans
Reality: This is false. Self-employed individuals, business owners, freelancers, and even farmers can apply for a home loan, provided they meet the lender’s income and documentation criteria.
Lenders assess your repayment capacity and credit score, not just your job title.
Myth 3: You Must Have a Perfect Credit Score
Reality: While a good credit score (750+) increases your chances of getting a home loan at a lower interest rate, it’s not mandatory. Many banks and NBFCs also offer loans to those with scores in the 650–750 range, albeit with slightly higher interest rates.
RupeeQ Tip:
If your credit score is low, consider improving it by checking your free credit score on RupeeQ and repaying existing dues.
Myth 4: The Lowest Interest Rate is Always the Best Deal
Reality: Home loan interest rates are crucial, but they aren’t the only cost. You should also consider:
- Processing fees
- Prepayment charges
- Legal/technical charges
- Loan tenure
Sometimes, a loan with a slightly higher rate but no hidden charges could cost you less over time.
Example:
A 0.25% higher rate on a 20-year loan of ₹40 lakhs = ₹5,000 extra annually. But if you’re saving ₹10,000 in processing fees, it’s worth it.
Myth 5: You Cannot Prepay a Home Loan
Reality: This myth is a leftover from the fixed-rate loan days. Today, most floating-rate home loans (which is what most borrowers opt for) have no prepayment penalties.
Many lenders allow partial prepayment after a lock-in period even for fixed-rate loans.
RupeeQ Tip: Use your annual bonus or surplus funds to make prepayments and reduce your overall interest burden.
Myth 6: Home Loan EMIs Never Change
Reality: If you’ve taken a floating interest rate, your EMI can increase or decrease based on RBI repo rate changes and bank decisions.
Recent Example:
In April 2024, when the RBI hiked repo rates, many borrowers saw their EMIs increase by ₹1,000–₹2,000 per month.
This is why it’s crucial to plan for EMI fluctuations in your budget.
Myth 7: You Can Only Claim Tax Benefits on One Home Loan
Reality: As per the Income Tax Act, you can claim tax deductions on multiple home loans if you own more than one house, subject to certain conditions.
Deductions You Can Claim:
- Section 80C: Up to ₹1.5 lakh on principal repayment
- Section 24(b): Up to ₹2 lakh on interest payment (self-occupied property)
If your second house is let out, there’s no upper limit on interest deduction under Section 24(b).
Myth 8: Longer Tenure Means Easier Repayment
Reality: A longer tenure reduces your EMI but increases your total interest outgo significantly.
Example:
| Loan Amount | Tenure | Interest Rate | EMI (Approx) | Total Interest |
| ₹40 lakhs | 20 years | 9% | ₹36,000 | ₹46 lakhs |
| ₹40 lakhs | 15 years | 9% | ₹40,500 | ₹33 lakhs |
Paying ₹4,500 extra per month helps you save ₹13 lakhs in interest!
RupeeQ Tip: If you can afford a slightly higher EMI, go for a shorter tenure to become debt-free faster.
Myth 9: Home Loan = Immediate Approval
Reality: A home loan approval depends on:
- Credit score
- Income and repayment capacity
- Property value and legality
- Documentation
Even if you’re pre-approved, disbursal takes time, especially if property verification or legal checks raise issues.
RupeeQ Tip: Always keep property papers, income proof, and ID documents ready to speed up the process. RupeeQ helps match you with lenders that suit your profile.
Myth 10: All Lenders Offer the Same Deal
Reality: Lenders have different eligibility criteria, interest slabs, processing fees, and customer service levels. Two banks can offer you drastically different loan terms for the same property and income.
Example:
One bank may offer 8.5% with ₹20,000 processing fee, while another offers 9.0% but waives the processing fee entirely.
RupeeQ Tip: Compare home loan offers from multiple banks and NBFCs on RupeeQ before making a choice.
Conclusion
When it comes to home loans, misinformation can cost you lakhs. Believing in outdated or incorrect ideas may delay your decision or lead to expensive mistakes. Always do your research, compare lenders, check your credit score, and plan your repayment with clarity.
At RupeeQ, we help you break through the confusion by offering:
- Pre-matched loan offers
- Free credit score checks
- EMI calculators
- Personalized assistance
Whether you’re buying your first home or refinancing an existing one, make the smarter choice with RupeeQ.
FAQs on Common Home Loan Myths
Q1. Is it true that you need to be salaried to get a home loan?
No. Self-employed, freelancers, and business owners can also get home loans if they meet the lender’s income and credit score criteria.
Q2. Does a lower interest rate always mean a better loan?
Not always. Lower interest rates may come with higher processing fees or hidden charges. Always compare total loan cost.
Q3. Can I still get a home loan with a low credit score?
Yes, though the interest rate may be higher. Some lenders may also reduce the loan amount or ask for additional documentation.
Q4. Is prepayment allowed in home loans?
Yes, especially for floating rate loans. Fixed rate loans may have limited prepayment options depending on the lender.
Q5. Can I get tax benefits on more than one home loan?
Yes, subject to usage (self-occupied or rented). Section 24 and 80C benefits can be claimed on multiple loans.
