Top 5 Home Loan Myths in India Busted (2025 Guide)

For most Indians, buying a home means taking a home loan. But despite millions using housing finance every year, many buyers still fall for myths and half-truths that lead to confusion, delays, or costly mistakes.

This article busts the top 5 home loan myths in India, helping you make informed financial decisions as a buyer in 2025.

Myth 1: Only People with High Salaries Can Get a Home Loan

Reality: Home loans are available even for modest-income buyers.

Banks and NBFCs consider various factors, not just your salary. What matters more is:

Stable income source (salaried or self-employed)
CIBIL score (700+ preferred)
Existing EMIs or debts
Co-applicant income (spouse/parents)

Many affordable housing schemes are designed for individuals earning ₹25,000–₹40,000/month — especially for flats under ₹40 lakhs in cities like Hyderabad.

Myth 2: You Can Only Get One Home Loan at a Time

Reality: You can take more than one home loan, provided you meet eligibility.

Yes, banks allow you to take multiple home loans — for example:

First home loan for your flat
Second for a plot or another property

As long as your income and repayment capacity support both EMIs, lenders won’t stop you. Just note:

Your credit score should remain healthy
Debt-to-income ratio should be within safe limits (below 50%)

Myth 3: Lowest Interest Rate = Best Home Loan

Reality: The lowest rate isn’t always the best deal.

Buyers often chase the cheapest rate, but forget to check:

Processing fees and legal charges
Loan prepayment rules
Whether the interest is fixed or floating
Customer service and approval speed

For example, Bank A may offer 8.35% but charge ₹10,000 in processing fees, while Bank B offers 8.45% but gives zero processing and quicker disbursal. Choose a balanced package, not just the headline rate.

Myth 4: A Low CIBIL Score Means You Can’t Get a Home Loan

Reality: You still can — with some extra effort.

While 700+ is preferred, you may still qualify with:

Co-applicant support (like a spouse with good credit)
Higher down payment (25–30%)
NBFCs and private lenders who accept low CIBIL profiles (at higher rates)

Also, if your CIBIL is low due to credit card defaults, you can take 3–6 months to rebuild your score before applying.

Myth 5: Prepaying Home Loan Always Saves Money

Reality: Not always — depends on when and how you prepay.

Prepayment is most beneficial in the first half of your loan tenure (first 5–7 years), because that’s when interest is highest.

However:

If you have a low interest rate and the money could earn better returns elsewhere (like mutual funds), consider alternatives.
Some lenders charge prepayment penalties, especially for fixed-rate loans.

Always use a home loan prepayment calculator before deciding.

Bonus Myth: Home Loan EMIs Start After Possession

Reality: EMIs can start earlier.

If you’re buying an under-construction flat, banks disburse in stages. You may:

Pay pre-EMI (interest-only payments) during construction
Start full EMI after total disbursal

Some builders offer “No EMI till possession” schemes — but verify the terms carefully.

Final Thoughts

Believing in home loan myths in India can delay your homeownership dreams or lead to financial errors. Always double-check the facts with your lender, use official tools, and read the fine print before signing.

At FlatsForSaleInHyderabad.com, we help buyers understand their loan eligibility, connect with trusted banks, and assist in paperwork, pre-approval, and disbursal — making home buying smoother and smarter.

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