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Fixed Or Floating Home Loan RatesKnow The Difference
Fixed Rate Home Loans
The existing Fixed Rate of Interest, agreed between the Lender & Borrower at the time of Home Loan Sanction, which shall remain unchanged throughout the Loan Tenure.
Beware: Note the line in Loan Sanction Letter mentioning the Entire loan period as Fixed. There are loan offers in which rates are fixed for some period of loan tenure & not completely.
NOTE
Take Notice of reset clause in Fixed rate Home Loans. Fixed Rate loans are not fixed for the entire Loan Tenure. The reset clause can be revoked depending on ‘Terms & Conditions’ of Home Loan. So, Banks can reset the fixed interest rate on your Home Loan As & with Market conditions. Check if Your Bank offering Fixed Rate has Rest Clause.
Floating/Variable/Adjustable Rate Home Loans (FRHL/VRHL/ARHL)
Simply put, it means that whenever the Floating Rates change, the Number of EMIs will also change. The Amount of EMIs will remain unchanged.
BEWARE
Home Loan Interest Rates are calculated on Basis of Marginal Cost-based Lending Rate (MCLR) by All Banks, which is directly dependent on the Reserve Bank of India’s lending rates policies & Subject To Change.
Note : Floating Rate
Borrowers need to keep track of Variations in Interest Rates and check as to how their Number of EMIs are being Affected. Some of the Banks generally do Not pass down the benefits/only do it after 3-6 months or Until the Borrower demands.
Fixed and Variable Rate Loans (Combination Rate)
It’s a Combination of Both Rates wherein both the tenures, of Fixed as well as Floating Rates, are defined between the Lender and the Borrower at the time of Loan Sanction.
Permissibility of Change In Type of Interest Rates
The Borrowers have the options of changing from Fixed to Floating Interest Rates and vice versa throughout the Loan period albeit at a cost. You should be convinced of your decision, backed up by facts.
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