How good are hybrid home loans?

Picking up the right kind of rate of interest for your housing loan is very essential initially as well as throughout the loan tenure. A loan seeker does not any choice other than choosing between fixed and floating rate of interest. For the ones who would like to filter out the bests from both the available options of interest rates, hybrid loans prove to be the best possible option. Here have been provided some important facts that may help a loan seeker understand hybrid housing loans better and decided if they are meant for them.
What is a hybrid housing loan?
As the name itself suggests, a hybrid loan is a combination of fixed and floating rates of interest. Under a hybrid loan arrangement, the loan lender offers the loan seeker a fixed rate of interest for the first few years of the loan tenure following which the prevailing floating rates of interest do apply.
In such case, two loan agreements are prepared- one based on the fixed rate of interest part and the other on the floating rate of interest part of the home loan. However, only few banks offer such kind of hybrid housing loans.
Should one opt for a hybrid housing loan?
The hybrid housing loans serve as an ideal option for the ones who are unable to afford fluctuations in the monthly expenses during the first few years of their loan tenure. This makes it ideal for the young professionals who have just started their careers to find stability and certainty before they can take any kind of extra financial burden. A fixed EMI helps them in planning their finances better and therefore, allowing to save more along with making moderate investments.
Can a hybrid loan be transferred to a lower interest rate?
Yes, all hybrid housing loans can be switched by the loan borrowers according to their convenience. There is no specified waiting period unless one has got it specified in his loan agreement. However, in case one chooses to switch his home loan within the period of fixed rate then, he may be liable to pay a pre-payment penalty.
It is highly advisable to keep a track of the changes being made in one’s rate of interest and see whether switching to other loan plan would be more beneficial.