4 Home Loan Myths That Cost Borrowers Money

"A longer tenure means I pay less."

A longer tenure lowers your EMI — the monthly amount — but increases the total interest you pay over the life of the loan, often dramatically. Stretching a loan from 15 to 25 years can nearly double the total interest paid, even though the monthly payment feels more comfortable.

"Prepayment penalties make extra payments pointless."

Most Indian banks no longer charge prepayment penalties on floating-rate loans — RBI guidelines prohibit it for individual borrowers on floating-rate home loans specifically. Always confirm with your specific lender and loan type, since fixed-rate loans and some other loan categories can still carry a penalty.

"The lowest advertised rate is always the best deal."

Processing fees, legal and administrative charges, and how often the rate resets all affect the real cost of a loan. Compare the total cost across lenders, not just the headline interest rate — two loans at the same rate can still cost meaningfully different amounts once fees are counted in.

"Paying off my home loan should always be the priority."

If your loan's interest rate is well below what you could reasonably expect to earn by investing instead, prepaying aggressively isn't automatically the optimal choice — it depends on the gap between your loan rate and your realistic investment return, and on how much certainty you personally value.

See a full worked comparison of prepaying vs investing