Different Types Of Home Loan Rates – Explained!

Isn’t fixed rate very predictable? But, hybrid rate will make EMI easier to pay right? Oh, floating rate will have the zero prepayment charges. Won’t that be fabulous? These kinds of questions confuse and mislead borrowers. Home loan interest rates are the most important factor in any home loan. Most borrowers accept and reject housing finance company based on these rates. So, let’s understand three different types of home loan rates in India. So you can take all house loan related decisions profitably.

Fixed home loan rates:

This type of home loan interest rate does not change for a predetermined period of time. Most housing finance organizations offer a fixed rate for a period of 3 to 5 years. Then, it is adjusted to the tune of the base rate at the time.

Pros:

* No fluctuations in EMI

Cons:

* Higher than floating and hybrid rate of interest
* Involves a prepayment charge

Floating home loan rates:

This type of home loan interest rate will change with every rise and fall in the base rate. However, if you look at the current home loan rates in India, it is a preferred choice of most borrowers.

Pros:

* The lowest possible EMI among all three types
* Zero prepayment charge

Cons:

* Considerable fluctuations in EMI

Hybrid home loan rates:

This type of housing loan interest rate attempts to combine the best of both worlds. A borrower opting for a hybrid rate of interest can avail a part of a loan with fixed rate and a part of a loan with floating rate. This is a great strategy for people, who want to understand the merits of both these types.

Pros:

* Advantages of both rates

Cons:

* Disadvantages of both rates
* Different contracts and different terms and conditions for a single loan

So, when you are hunting for a housing loan, it is important to understand all these rates holistically. Then you can select the best option for your home. However, over-obsession about the housing loan interest rates is not helpful either. This loan is for 15 to 30 years. You can opt for any rate of interest. Your chances, of getting a consistent rate of interest for entire home loan tenure, are non-existent. So, you must keep a clear eye on the other elements of the house loan package. They will have a huge influence on your home loan EMI too. E.g.: repayment option of your loan package can have a significant impact on your EMI. It will help you see the big picture and select a loan that will suit your lifestyle and income well.