“Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move” 1

Published on: April 17, 2025

“Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move”

Table of Contents

🏠 Home Loan: Wrong Decision or the Right Move?

Have you been dreaming of owning a home but losing sleep over EMI payments? Does the thought of debt make you feel like it’s better to delay or avoid taking a home loan altogether? If you’re determined to pay off the loan early to reduce interest, you might not fully understand how home loans work. Don’t let fear or half-knowledge keep you away from your dream home. Jayant’s story will show you why! (“Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move”)

💼 Meet Jayant and Kalyani

Jayant, a software engineer, and his wife Kalyani, who also works in the same company, earn a combined salary of ₹2 lakhs per month. With family responsibilities and a frugal lifestyle, they managed to save ₹15 lakhs. Ready to settle down, they found a flat in a prime area priced at ₹60 lakhs (including registration). They loved the place and approached the bank for a loan.

The bank approved a home loan of ₹50 lakhs, to be processed within two days. With ₹5 lakhs from their savings used towards the down payment, things seemed perfect—until the EMI calculations kicked in.(“Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move”)

📉 The Shock: Understanding the EMI Trap

The next day, the bank officer broke down the loan details:

Loan Amount: ₹50 lakhs
Tenure: 15 years
Interest Rate: 9%
EMI: ₹50,713/month

Jayanth quickly did the math — 15 years of ₹50,713 a month meant they’d be paying over ₹91 lakhs for a ₹50 lakh loan. That’s ₹41 lakhs in interest alone! Their excitement turned into anxiety.

He asked, “If we pay early, can we reduce the interest burden?”

The officer replied, “If you pay off the loan in three years, you’ll still need to repay ₹45 lakhs.”

Jayanth was stunned. “So even if we pay ₹18 lakhs in just three years, the principal reduces by only ₹5 lakhs?”

Jayant even asked about early repayment. The officer told him that even if he repaid the entire loan in three years, he’d still need to pay ₹45 lakhs—barely a ₹5 lakh reduction on the principal. Jayant was confused and disappointed.

🤝 Enter Sudhir: The Voice of Financial Wisdom

Jayant turned to his friend Sudhir for advice. Sudhir laughed and said, “If you break down every loan like this, you’ll never buy a house!”

He gave a simple analogy: “If someone lent you ₹50 lakhs privately, you’d pay ₹50,000 interest monthly. But that amount wouldn’t reduce the principal at all. With a home loan, every EMI reduces your principal and interest step-by-step. Over 180 months (15 years), the interest component shrinks while the principal portion grows.”(“Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move”)

🧮 Interest vs. Rent

Jayant still looked unsure. So Sudhir asked, “How much rent do you pay now?” Jayant replied, “₹16,000.”

“Exactly!” Sudhir exclaimed. “That’s the same money you’ll now use to pay off your own home. Rent is money gone forever. But every rupee of EMI is building your asset. And think about this—9% annual interest is just 0.75% per month. Plus, you get tax benefits on home loan interest and principal under Sections 80C and 24(b)!”

He concluded: “Don’t fear a loan that’s helping you create wealth. Take the leap.”

Reassured, Jayant smiled and said, “You’re the chief guest at our housewarming!”

“Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move”

💡 Final Thoughts

Home loans aren’t as scary as they seem. When used wisely, they’re a financial tool to help you build wealth, gain independence, and stop the cycle of rent. Don’t let interest myths block your way—understand the process and make informed decisions.

✨ About Me

Hi! I’m Manikanta Reddy, a passionate finance enthusiast with a strong understanding of money management, personal finance, and smart investment strategies. I believe financial literacy is the foundation of a secure and stress-free life — and I’m here to share practical insights, real-life examples, and simplified advice to help you make better financial decisions.

Whether it’s choosing between paying off a loan or investing, building emergency funds, or planning for retirement — I love breaking down complex topics into easy, actionable tips that anyone can follow.

Let’s learn, grow, and build wealth — the smart way. 💰

Home Loan Myths Busted: Why Taking a Housing Loan Can Be a Smart Move”

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Murder knife

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