Difference between floating and fixed loan, how to make a right choice
November 4th, 2014 | by Web Desk
Getting a home loan is really easy these days. Choosing the best option is always a difficult part of the process. One should do proper research before rushing in to something. The first thing that will bother the applicants while applying for a home loan is whether to go for a fixed home loan or floating home loan. At Media24by7, we have collected all the information to help our readers and home buyers to understand fixed and floating home loans. Here you will know which one is better.
Property hunt has increased globally. A working individual or a family, they all want to get settle down in a house. Because of the rise of industrialization, the need for residential and commercial properties is also getting high. There are countless advantages of investing into property and of buying for commercial or personal purpose. There are many reasons behind people spending more money in buying properties. Many people do not want to spend their hard earned cash on paying rents. People have started planning for their retirement and they are buying property to live a peaceful life after retirement. In real estate, the investment return has appeared to be either double or even triple within a few years. However, buying property in big cities is not as easy as it seems. Price hike is not only a problem; major thing is that people do not get trusted real estate partners. Indian cities are the most desired locations for property hunters. With all the facilities, these cities have become the most popular place for people looking for property. But going with the right loan is the thing one should consider carefully. Here you will find all the answers related to your queries about home loans:
Floating Home Loan:
Floating by name says that the rate of interest changes with market conditions. Floating home loans are tied to a base rate. If the base rate increases or decreases, the interest will change accordingly.
Benefits of floating interest rates:
- The major benefit with floating home loans is that they are cheaper than fixed rate home loans.
- If the floating interest rates go over the fixed rates, it will be for a period of loan.
- The interest rates will definitely go down and it will bring a lot of saving benefits to the borrower.
Drawbacks of floating rates home loan:
The drawbacks with floating interest rates are the uncertainty of monthly installments. It becomes difficult to maintain the budget. It is seen that borrowers had to pay extra with floating rates home loan.
Fixed Home Loan:
Fixed interest rate means you can pay home loans in equal installments over the whole time period of the loan. These installments are fixed. In this condition, the interest rate remains constant even if the market is facing fluctuations. Now we will see the benefits.
Benefits of fixed home loan:
- Interest rate remains constant
- It is perfect for those who are good at maintaining the budget and are look for a fixed monthly schedule of monthly repayments.
- Budget does not fluctuate
- It is certain and secure
Drawbacks of fixed home loans
There are few drawbacks of fixed interest rates. The major one is that they are usually higher than the floating rates. The second thing is if the rate of interest decreases, the fixed home loan does not give the benefit of lower interest rates and the borrower has to pay the same every month. Before making any decision, one should make sure that interest rate is fixed for entire tenure, not for a short period of time. Fixed home loan is a smart choice if a rise is expected in interest rates.
Now let’s take a look at floating home loan.
When it comes to making a decision on the interest rates, many people go for floating rates.
Finally, it is up to the borrower to choose which one is perfect for him. It is advisable for the borrower to compare home loans in detail. It is better to consult with a professional. If your priorities are security and budgeting, fixed interest rates home loans will be perfect for you. We suggest you to consider your requirements and budget before making any decision to get peace of mind.
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