Buying a new home involves spending a considerable amount of time on research, finding a suitable property, carrying out background checks and finding a housing loanwhich best suits your needs. But how does an individual ensure that the home loan will not prove to be too expensive for him? Comparing the home loans offered by different lending institutions is simply not enough.
The home loan interest rate depends on variety of factors such as the availability of the money in the market and the monetary policies which are in place and are regulated by the government at that time. Opting for a floating interest rate would mean that the loan installments will keep changing with the fluctuations inthe housing loan interest rates. A fixed rate of interest meansthat the individual might end up paying the same interest rate even if overall market scenario is getting better or if government policies call for lowered interest rates. To get the best home loan interest rate and keep the total outgo of repayment at the minimum,an individual must choose and interest rate that best suits his or her monetary situation.
Home loan interest rates are linked to lending aninstitution’s base rate which is decided by the banks on the basis of the guidelines which are set by the RBI.After this, the banks and the non-banking institutions stick to the prevailing rate in the market. Fixed interest rates offer protection against the fluctuation in the market. Whereas floating interest rate offer flexibility and they sometimes mean that the individual will pay lesser than he would if he takes up fixed interest rate, provided the overall market scenario improves or the government calls for lowered interest rate norms.
Choosing between the fixed and the floating home loan interest rates depends on the current economic scenario. The difference between the fixed and the floating interest rate can be easily found out by taking a look atthe present rate of interest. If the home loan interest is high, it is obvious it will drop opting due to floating rate of interest. Similarly if the interest rate if low opting for the fixed rate of interest rate would mean that he would save more in terms of the EMI the individual is going to pay. Fixed rate of interest will also help to manage asteady flow of cash but it needs to be low so that an individual will be able to sustain the EMI during the long terms of the repayment.
Thus choosing the type of the home loan interest ratewhich you think is good for you will help you to save money on the interest rates. Thinking carefully,researching andgauging the market will help the individual to get a good understanding of the futuretrends which might affect the repayment of the loan.