Although home loans are among the most popular financing products, many still let go of their dream of owning a house just because of their misconceptions regarding this loan product. Many believe housing loans are costlier than any other loan product. Many assume they don’t have ownership rights in the property even after paying regular EMIs.

If you also have some qualms related to this product, this guide can help you.

Common Home Loan Misconceptions 

1. Credit Score Decides Approval 

Credit score plays a role in housing finance approval but is not the deciding factor. Assume you earn Rs 2 lakhs a month and have five years of work experience without any break. The employer you work for is among the top 10 companies globally.

You have also never defaulted on a loan or delayed an EMI in the past. Your credit score is showing ‘NA’ or ‘Not Applicable’ status just because you have requested no loan product in the past.

With such a strong profile, there is no reason to face a home loan rejection. Still, if your lender hesitates to approve your funds, the best you can do is apply for a consumer durable loan for 3-6 months, pay your EMIs on time, and build a decent credit score.

2. You Lose Ownership Rights

Practically, if this happens, then even for drainage pipe replacement or painting the house, you need to obtain the lender’s permission. When you apply for a home loan and then take a home loan top up, the lender only has a conditional ownership right. That means they have the right to retain complete ownership of the property if you default on your debt and have the authority to either auction the property to recover the dues or use it for business purposes and credit any balance to your bank account.

However, before proceeding to the next step, remember that if you wish to sell your property to a third person during the loan course, you must first acquire a no-objection certificate from the lender.

3. Employment Type is Not Important 

Housing finance is accessible to both salaried individuals and entrepreneurs. However, there are many considerations for each profile.

For example, if you work for a salary, your employer is crucial. Job security might not be assured if you are employed at a sole proprietorship firm or a small shop that targets only a small market, such as a city or a few areas within a specific city. Even a small shift in consumer preferences could lead to significant losses for your organisation or delayed salary payments.

Given this scenario, most lenders prefer individuals who work in an MNC or government organisation.

Similarly, if you are a business owner, ensure you do not trade with an enemy nation. You must also check if your business can generate regular revenue or if cash inflow is only apparent during a festive season.

4. Age Has No Role

Suppose you are 70 years old and retired from your job a decade ago. You worked at a small private firm in your city throughout your career, earning enough to meet your needs. Unfortunately, your employer didn’t provide social security benefits like retirement pension or medical coverage. Since your salary was low, you didn’t manage to save much.

Now, if a lender approved you for, let’s say, a Rs 20 lakh home loan with an EMI of around Rs 21,000, how would you manage to pay off the debt?

Remember, the younger you are and the earlier you are in your career, the higher your chances of approval will be.


Debunking home loan myths is crucial for informed decision-making. When you are aware of the terms and conditions and how this loan product works, you can focus more on the repayment.