Home loan interest rates are among the most prominent factors that each prospective borrower acknowledges ahead of applying for a home loan. Based on your home loan eligibility it’s crucial to compare the varying home loan interest rates of policies you can apply for. To do so, many employ the use of a home loan EMI calculator before finalizing the desired loan for their needs.
Part of this decision is simply choosing the best home loan interest rate before making the decision to buy a home loan. There are two types of home loan interest rates: fixed and floating interest rates. Which of the two is ideal for a customer?
The answer is that it depends. As the name suggests, fixed home loan interest rates remain the same throughout the term of one’s policy, while a floating one can increase or decrease depending on a variety of factors. Fixed interest rates tend to be higher, not impacted by any market conditions, thereby making EMI’s for one’s home loan fixed as well. This means one can opt for budget planning with the sense of security they get about their EMIs.
Hence, fixed interest rates tend to work best with loans that are shorter in their term, namely those that range from 3 to 10 years since they lower risk without growing too costly in the long term.
On the other hand, floating home loan interest rates tend to offer customers a lower value which will be affected by factors in the market. Therefore, it will change as per interest rate changes announced by the RBI. Floating home loan interest rates are trickier to budget with but are suitable for long term home loan payments that are 20 to 30 years long since they drastically minimize costs.
In general, fixed interest rates are more expensive but come with a lower risk, while floating interest rates are less expensive with the potential to change. It is easily possible to shift from one type of interest rate to another if one struggles to manage their payments via one home loan interest rate.
Hence, based on one’s home loan eligibility, choosing the interest rate type that best suits them depends on their risk appetite, tenure of loan taken, and repayment ability.