How To Select Right Type Of Housing Loan Interest Rates?

When there are three different types of home loan interest rates in market, how do you choose the right type for you? Fixed, floating and hybrid interest rates have their pros and cons. You need to asses you financial situation accurately to estimate which housing loan interest rate will suit you the best. Go through this article and discover which one matches your financial needs well.

Fixed home loan rates:

This is an ideal choice for someone who prefers the stable EMI across the tenure. However, you should be willing to pay a bit extra for this consistent choice. There are sub-categories in this type of rates.

Pure fixed home loan interest rates remain consistent for entire tenure of your loan. Semi-fixed or dual interest rates remain fixed for tenure of 2 to 5 years. Then, they are revised as per the market conditions. The latter are more common and offered more commonly in market. Either way, you must be willing to pay at higher rate of interest to secure a stable EMI. As the chase for lowest interest rates reaches at its peak, there are very few borrowers willing to pay more in current market.

Floating home loan rates:

These are the lowest possible housing loan interest rates . If you receive a home loan offer with the lowest rates, this is a preferred choice. Another reason for its popularity is 0% prepayment charges. You can prepay your home loan easily.

However, there is an element of risk. If current monthly EMI is most you can save, you have a problem. Floating housing loan interest rates are based on base rate system or PLR system, which can fluctuate very easily. Though, lenders hardly reduce interest rates according to low base rate, the unexpected hikes are very likely. You will need to be prepared for the same and pay additional EMI.

Hybrid home loan rates:

This is the last and least popular choice in current housing loan market. These recently launched home loan rates in India combine the best of fixed and floating rates. You opt for two different home loans. A part of your entire principal amount is locked in fixed rate and another part is locked in floating rate. You can divide your loan in either 50-50 ratio or 40-60 percent ratio.

This choice suits the borrowers who want to opt for the best of the both worlds. You need a fair warning. It does bring in the worst of the both worlds too. Hence, you can choose this kind of loan if you have the flexibility in your terms and conditions to adjust this loan later on.

So, did you discover the right choice for you?