Home Loan Tips for Borrowers
2. Interest Rate
Home loans can be categorized into – Fixed Interest Rate and Floating Interest Rate loans. In home loans of fixed interest rate, the rate of interest remains fixed for a long time, which is usually higher than the prevailing floating rates.
On the other hand, in a home loan of floating interest rate, the rate of interest changes based on the market conditions. Borrower’s loan account and its interest rate is directly proportional to the bank’s internal benchmark rate, which changes according to market conditions or the RBI’s monetary policy, i.e. if the benchmark rate goes up, then the interest rates on the loan schemes also goes up.
Some banks also provide loan of a mix of fixed and floating interest rates; that is for the initial years, the rate of interest will be fixed and later follow the floating rate of interest scheme prevailing then.
