One of the benefits of home loans over most other financial products is the attractive rate of interest applicable to them. In cases of such mortgage loans, lenders provide a competitive rate of interest because they have the reassurance of repayment via liquidation of the mortgaged property in case of a default. Minor changes housing loan interests have a significant impact on the total cost of a loan considering the loan amount involved and the rate of interest offered. Considering that home loans are high-value advances, availing a credit that offers a significantly lower interest rate indicates substantial savings during the repayment process.
Catering to their customized requirements, the offered rate of interest on housing advances are available in two types – fixed and floating. Each comes with its set of pros and cons which first-time homebuyers and applicants should have a comprehensive idea to make the most beneficial decision.
Fixed vs floating home loan interests
Fixed-rate of interest
Fixed interest rates are market-independent and remain steady across the tenor of a loan. This interest-type is characterized by –
Floating rates of interest are market-linked and vary throughout a loan tenor. This type of interest rate is featured by –
Catering to their customized requirements, the offered rate of interest on housing advances are available in two types – fixed and floating. Each comes with its set of pros and cons which first-time homebuyers and applicants should have a comprehensive idea to make the most beneficial decision.
Fixed vs floating home loan interests
Fixed-rate of interest
Fixed interest rates are market-independent and remain steady across the tenor of a loan. This interest-type is characterized by –
- Easy forecast of EMIs, thereby bringing in chances of a convenient repayment structure.
- Considering that the home loan interest rate is at an all-time low, availing this option is deemed suitable.
Floating rates of interest are market-linked and vary throughout a loan tenor. This type of interest rate is featured by –
- In cases of interest rate drops, a borrower gets to pay the affordable home loan EMIs
- For individuals well-versed with the financial market, choosing this interest rate is ideal if the financial scenario promotes the same. In case you expect home loan interest rates to dip shortly, this is the best possible option.
All that borrowers need to do before settling upon an interest rate type is follow up on the interest rate of the housing loan for the past few months and decide accordingly.
Also Read: Want to Pay Less Interest on Your Home Loan? Follow These 3 Tips!
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