Things you need to know about interest rates on home loans


Buying a home is always a lifetime investment and an expensive affair as you pay a hefty amount over the span of 20-25 years. With the emergence of home loans, it has become relatively easy for middle and upper-middle class people to finance your dream abode. When you take a loan from bank or finance companies, obviously home loan interest rates is the crux component to decide the principal amount and the monthly installment that you can afford. To decide which home loan interest rate is suitable requires a lot of understanding on the subject and mostly need a good opinion from the financial experts. Although they are there  to suggest you what's suitable based on your financial strength, here's a quick guide on the subject of interest rates:

Fixed Interest Rates: As the name suggest, fixed home loan interest rates are uniform across the tenure irrespective of market conditions.

Floating Interest Rates: Floating rates depend on the market conditions and it will keep on increasing or decreasing during the loan tenure. 

Both these rate has their own advantages and can be chosen based on your income source, risk appetite, and financial backgrounds. Also, there are some leading private finance companies that have come up with partial fixed-floating interest rates wherein a part of the tenure the interest rate is fixed and after that, it will turn into floating rates.

When the markets are predicted to rise in near future, you should opt for a fixed interest rate to avoid yours from any huge losses. It will be safe to opt for fixed rates. These kinds of rates are good for people who are looking for fixed monthly expenses and don't want to take any risks associated with home loan repayments. These rates are slightly higher because it’s the lender who is bearing the risks of fluctuating market conditions and offering you stable rates and monthly payments. 

When the markets are about to fall in near future opt for floating interest rates and make enjoy lower EMIs with affordable loans on your pockets. These kinds of rates are good for people who believe in their potential and risk-taking ability especially the businessmen who don't fear with the tidal conditions. The good part is, under floating rates interest rates is slightly lower because borrower and lender both are taking equal risks. Also, you don’t have any pre-payment charges for floating interest rate loans.

Experts say a good income source, additional income source, stable job or business; credit score will play a decisive role in offering a particular interest rate by the lender. Maintaining good credit score and stable income source, high margin money will help you negotiate with the lenders for low-interest rate deals.

Other than this, because of stiff competition amongst the pioneer players, it’s the borrower who can enjoy festive, seasonal and promotional discounts on interest rates around the year.

A golden principle: The higher the tenure more would be the interest rate you will pay to the banks or private players and smaller the tenure lesser would be the home loan interest rates you are going to pay to the lenders. 


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