Lower interest rates often urge you to take the home loan to buy the home you cherish for. It’s a relative theory: Lower the interest rate less will be the amount you pay in addition to the principal amount of the loan. Numerous lending organizations in the market give the loan amount at varying interest rates. Your plan is to end up buying the home you cherish at a price you can afford. This is possible only when you select your lender diligently from the available banks and non banking financial companies. Different institutes vary from each other in their terms and conditions, repayment flexibility and most importantly the rate of interest at which they offer the loan.You get tax benefit on the interest you pay.
Under the umbrella of housing loan interest rates, three variants are there: fixed rate, floating or adjustable rate and truly fixed rate. Each rate has its own benefits and disadvantages. Risk averse customers don’t like to part away with their hard-earned money only because of volatility of the economic world. They prefer low returns but risk free debt investment tools. These types of customers like to keep distance from the any kind of uncertainty. They prefer predictive and assured path. Risk averse customers prefer fixed rate of housing loan interest rates.
The prime reason for not selecting the adjustable rate of interest is because of its volatile nature. The rate may change anytime oscillating the set monthly budget of the borrower. In case of adjustable rate of interest if the tenure is longer, the borrower may get exposed to a numberof fluctuations and if the rate increases it may result either in higher EMI or longer loan tenure. The borrowers who prefer certainty are happy to lock a particular rate, and don’t cares if the floating interest rate comes down.
In the present scenario of uncertain economic condition, fixed rate of interest is favorable. It promises the customer a financial stability. If the borrower is planning to hedge their risk of volatility and doesn’t want to gamble with the rates, then he must opt for fixed rate of interest. It gives a sense of stability without disturbing the monthly budget calculation.
The fixed rate of interest gives a sense of security, as the borrower has to pay the same rate as offered by the financial organization when they signed the dotted line. So there is lesser chance of any extra payment exceeding their budget. Unlike the floating rate, that offers frequent changes in the EMI owing to market fluctuations.
Recently the home loan providers have come up with three kinds of fixed rate options, three years, five years and ten years. The housing loan interest rates are fixed for a committed time without any reset clause; it is termed as truly fixed rate of interest. The borrowers are advised to check the papers thoroughly before signing the loan agreement, because in garb of fixed loan, some witty organization makes the borrower sign a truly fixed rate of interest, and the customer comes to know only when they are charged with different EMI charge after some time.
Before selecting the lender, make use of the online aggregator site and the reviews of existing customers to have a clear understanding of the lenders’ services. Select the rates after diligent study and expert advice; after all it is a matter of the home you admire and about your affordability.