Different Types Of Housing Loan Interest Rates Available In India

When an applicant is applying for a home loan, one of the most important factors that need to be kept in mind is the interest rate charged. The interest plays an important role as depending on the home loan interest rates, the applicants monthly EMI tends to vary even if the loan amount is the same. Banks do offer home loan applicants a choice between the types of interest they wish to opt for. Such a decision must always be taken after careful study. The two main types of housing loan interest rates are:

Fixed interest rate

When an applicant opts for a fixed rate of interest, during the entire tenure of the loan, the EMIs will be fixed. This is an option for those who wish for a steady and safe option when it comes to repaying their loan. The benefit of this housing loan interest rate is that there is no uncertainty of the charge of EMIs each month. The EMI is not affected by the changes in the interest rates. Fixed rate of interest can be lower that floating interest rates. If you wish to however make any extra payments or pay off the loan in advance, you may be required to pay an early repayment charge. This interest is for applicants who wish to create a fixed budget for their monthly payments.

Floating interest rate

When an applicant opts for a floating interest rate, the EMI value each month changes depending on the interest rate. This option of a housing loan interest rate is for applicants who don’t mind the risk in an attempt to get a cheaper interest amount. The benefit of opting for this type of interest is that you can repay your loan faster when the interest rate reduces. There however a risk involved. The housing loan interest rate can go higher than the fixed interest rate charged and can make the repayment of the loan process more difficult and expensive. But the time period for which the interest rate increases is not permanent and will go down. Hence this type of housing loan interest rate can lead to a larger amount of savings for the borrower.

It hence is important for an applicant to choose an interest rate that suits his needs. Fixed interest rates provide stability while floating interest rates provide the option of cheaper EMIs. One must understand that when opting for a floating interest rate, the EMI each month will change. They should be able to predict an optimistic and pessimistic amount of EMI to be prepared for both a high or low interest rate.