Lowering house loan interest increases the loan eligibility

Posted by Anurag Mishra on October 10th, 2017

The high interest rates in the past made the potential homebuyers to keep their home purchase plan on hold. But with lowest house loan interest in the home loan history, people are daring to come forward, pick a property of their choice and finance their purchase with a home loan at low interest rates that ranges from 8.4-9% per annum on the home loan amount. Earlier this rate was in between 15-18%, which made the home buying essential need a difficult task to accomplish. The interest rate matters so much for the borrowers because the percentage determines the extra amount one has to pay on the loan amount, which is most often a lump sum amount depending on the loan term and loan amount.

There are basically two types of interest rates: floating/adjustable rate of interest and fixed rate of interest. Some financers in the market offer a combination of the two types of rates and are termed as truly fixed interest rates. The borrower needs to choose from the above mentioned types, for repaying the loan amount. The rates are designed by the financers, by keeping the borrowers’ affordability & the financial profile in mind. Some are comfortable with the fluctuating floating rates, some prefer fixed rate for its stable nature. To give a solution to the dilemma of fixed or adjustable there is truly fixed rate.

When a borrower goes for an adjustable rate of interest, then the borrower is ready to adjust his financial sails according to the financial condition of the market. The rate increases or decreases depending on the market health & government policies. Experts advise borrowers to opt for adjustable house loan interest, because of following advantages:

  • The rates are lower compared to the fixed rate of interest. Though it is floating in nature, but chances are there that the rising interest rates may not cross the fixed rate. In case it happens, it may be for shorter duration. So the borrower enjoys lower interest rates.
  • A lower rate reduces the interest cost.
  • In case of prepayment, the borrower is free of penalty charges, which the fixed rate attracts in case, the prepayment is done before a stipulated time.
  • The government policies and market financial has direct impact on the rates, which is in the descending plane in the present market scenario.

The fixed rate of interest is perfect for the risk averse borrowers, who would pay extra charge in order to enjoy stability and mental peace. The fixed house loan interest rates are higher than the floating rates and are free from market fluctuations and ever changing government policies. The borrower enjoys the benefit of fixed monthly budget and is immune from the fluctuations.

The truly fixed interest rates are fixed in the initial period of the tenure, after the stipulated period it converts into floating rate of interest automatically. This rate protects the borrower from fluctuations in the initial years and gives them time to prepare for the fluctuations, which they would face after conversion of the interest type.

It’s is better to take expert advice in designing the loan term with suitable interest rate, so that the tenure is burden free and  you are saved from being a defaulter.

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Anurag Mishra

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Anurag Mishra
Joined: December 13th, 2016
Articles Posted: 108

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