What are fixed rate home loans?
When you opt for home loans in India, you have the option of picking either a fixed or floating rate loan. With the former, your interest rate and EMIs payable remain constant over the applicable home loan tenor. On the other hand, with floating rate home loans, your interest changes fluctuate according the prevailing market conditions.
Fixed rate home loans are not affected these fluctuations, which means it is a better option for risk-averse borrowers.
Benefits of taking fixed rate home loans
- Borrowers do not have to worry about the interest rate changing unfavourably.
- Loan repayment is easy to budget for and this allows for effective long-term planning.
- Borrowers enjoy a great sense of financial security on account of the lesser risk involved.
When comparing the two, you are likely to enjoy lower interest rates with a floating rate home loan. However, should the market shift unfavourably down the line, you may end up paying a lot more in interest than you would with a fixed rate home loan.
Also know: Fixed or floating rate: Which is best for home loan