The Best Way to Respond To Fluctuations In Home Loan Rates

Potential and existing borrowers will be concerned about fluctuations in home loan rates. The potential borrowers mull over the potential increase in EMI with a rising home loan rates. So do borrowers, who are currently repaying home loan. But, there are 4 ways to respond to these fluctuations. In spite of the ideal choice available, check all of them to choose one that fits your current financial status well.

1. Choose fixed home loan rate

If you can afford fixed rate of interest, you can partially skip the potential fluctuations. Most housing companies in India adjust the fixed home loan interest rates every 3 to5 years. So, you do not have to worry about it constantly. There are few expensive housing loan products in the market for 10-year fixed rate of interest too.

2. Formulate repayment strategy

If you opt for floating rate of interest, you can remain prepared for the fluctuations. This is considered as the best way to respond to the fluctuations in home loan rates in India. You need to gather sufficient funds to repay your home loan EMI for next 6 months. Then set them aside for a rainy day. You can even opt to investment them low-liquidity financial product like fixed deposit. Such funds can support you during any fluctuation in interest rate and will give you time to adjust to the new rate strategically.

3. Restructure or reschedule your loan

This is the suitable response to increasing home loan rate in India if you do not have the time to gather the nest egg. If you realize that you will not be able to include your home loan EMI easily into this upcoming month’s cash flow, you should ask for help. Your home loan officer can be of great assistance in this scenario. These two options allow you to lower your EMI within your comfort zone. Rescheduling extends your home loan tenure so that your EMI is lowered. Restructuring is more comprehensive process. It aims for a similar result through changes in several aspects of the home loan product.

4. Prepay your home loan

If you do not want to repay your home loan at the higher rate of interest, you must gather sufficient funds to make additional prepayment of your loan. It will lower the amount of interest as well as home loan tenure. However, lenders discourage this practice. So, you need to be careful. But, there is good news. As of today, there are zero percent prepayment charges on home loans with floating interest rates.

These options can be used beneficially if you are plan well. Most people, who do not plan their finances, land up skipping their EMI. It will make it impossible to get a home loan refinance at any time in the future. So, plan well, make smart choices, and stay out of vicious cycles.