Fixed Rate Or Floating Rate? Which Home Loan Suits You Best
Once you have finalised the perfect 3 BHK residential apartment in Thane, it is time to think about a home loan. Long with deciding which bank or lender you want to opt for, you also have to choose between a fixed interest rate and a floating interest rate. As the interest on a home loan is no small feat, it is advisable to carefully consider the two alternatives to identify which works best for you.
Fixed Interest Rate Home Loan
Under this plan, the interest rate is fixed at the time of initiating the home loan. This gives you complete clarity in planning your budget as each loan repayment will be the same rate as fixed. For a lot of people looking for a luxury 2 BHK in Mulund, this clarity is important to plan their loan tenure, budget, and set up a regular payment schedule.
However, fixed rates are often higher than floating interest rates making them less attractive to some. Here is when a fixed rate works best for you:
- You can easily accommodate the EMI amount required to be paid at the pre-decided intervals. Make sure to account for all your other responsibilities and expenses while also keeping some money available for emergencies.
- If interest rates are expected to rise or if you have taken the loan during an offer or scheme offering low-interest rates.
Floating Interest Rate Home Loan
Here, the interest rate is not fixed but revised every interval which can be quarterly, semi-annually, or as per another period specified by the agreement. The interest rate is determined based on the market interest rate. Based on which way the market moves, people may be required to pay more or less each interval. To accommodate for interest rate fluctuations, lenders may adjust your home loan tenure so as not to overburden you during higher periods of higher interest rates.
Here is when a floating rate works best for you:
- If you buy a luxury 2 BHK home in Thane during a high-interest rate period and want to wait for the market to correct itself.
- If you want to take advantage of the lower interest rate typically associated with floating rate plans as compared to fixed rate plans.
Which Should You Choose?
Deciding between a fixed rate plan and a flexible plan is not always easy. A lot of people see the merit in both plans but also the disadvantages. To get the best of each plan, you can also choose to opt for a combination of the two. Here, a part of your home loan draws a fixed interest rate while the remaining portion is linked to the market rate. Often, you can also switch your plans later after paying a fee.
Such home loan decisions should be carefully considered as they impact every repayment for the entire tenure. To prevent problems later, along with your banks, you can also consult the experts at Ace Realty, a trusted real estate developer in Thane.