The Types Of Interest Rates For Home Loans

There are three types of housing loan interest rates : fixed, floating and hybrid. You cannot simplify it further. However, you will still need to take an in-depth look at them, which will help you to evaluate them well and thus select the best type of home loan rates to suit your needs and financial situation.

Fixed interest rate for home loans

Though it means what it says, you need to be cautious because there are two types within this category as well. There are fixed interest rates for housing loans that are fixed for the tenure of the home loan, which can be up to 20 to 30 years. In most cases, there are housing loans, where the interest rates are fixed for a period of 3 to 5 years only.

You need to check the terms and conditions carefully to comprehend the housing company’s strategy. The rates are fixed for 3 to 5 years. Then, they are re-evaluated. After this evaluation, the rates are hiked up to stand a bit higher than the current floating interest rates. This process helps to ensure that the financial product is deemed safe for the next 3 to 5 years. If you get a home loan that has a fixed rate for the whole tenure, you need to verify how much higher it is than the floating rates, as it will be. If you can comfortably pay home loan at higher interest rates, then it is the right call for you.

Floating interest rate for home loans

Floating rates are much more prone to variation. They are tied to the base rate, which can vary on a monthly basis. In the long run, floating interest rates will soar during any financial crisis and plummet when the markets are bullish. Most home loans are for tenure of 20 to 30 years, so the borrower must anticipate both these periods. Either way though, most believe that the floating rate of interest will be lower than the fixed rates.

Hybrid interest rate for home loans

This kind of interest rate on housing loans is designed to offer a combination of fixed and floating rates. Then, you can enjoy the safety of the fixed rates with a flexibility of the floating rates. Nevertheless, it is executed by making two separate contracts for partial amounts of the home loan. This combination of home loan rates in India is a hot new favourite. Yet, you must choose it cautiously.

So, be careful while choosing the home loan rates because it can backfire either way. If you are not prepared to understand and escalate with the changing times, it can lead to some tough months for the monthly cash flow.