5 Myths of Home Loans

Dispelling the myths about home loans is important, especially because certain false assumptions can convince you not to get the loan that you actually need to buy your dream house.

Home loan myths

Some of the most common home loan myths that are floating around include:

  1. You only need to save money for a deposit

    It is important to know that you have to save some money for other things besides the deposit. Some costs that relate to purchasing a house include inspection and legal fees, lender’s charges, stamp duties, and moving fees. All these can reach up to 7% of the house price. This means that for a $400,000 house, the amount of extra costs can be up to $28,000, a significant chunk of change.

  2. You should always choose the loan with the lowest interest rate

    There are many other things that you should consider besides the interest rate. For example, most home loans with low interest rates are not only inflexible but also come along with huge administrative fees, which can double the monthly installment.

  3. Prepayments attract huge penalties

    This is simply not true. While some banks do not charge prepayment penalties at all, the lenders who require moderate fees decline them after about 3 years.

  4. A variable rate home loan is the worst possible financing option

    Sometimes, a variable rate is better than a fixed rate because it delivers greater flexibility for exiting a loan. Most fixed rate home loans are costly to exit and cannot save you money if the interest rate falls.

  5. Term extension on home loans saves you money

    This is a completely false assumption. Although loan term extension reduces monthly payments, it actually increases the administrative and interest costs of the loan. The best strategy to cut down the costs accompanying a home loan is to pay more than the minimum monthly repayment.

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Robin Williams

Robin Williams is an Executive at CashOne, a reputable financial services company that helps consumers tide over their short-term financial crises. Our fast, convenient, and secure online loan application eliminates the unnecessary hassles or time required to procure payday loans online.


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