Are you planning to buy your dream home? You might have your property selected, your down payment ready, and your finances planned. But have you done enough research on the interest rates you will incur when you take the home loan? Have you done enough home work on which kind of interest suits you best? Here are some pointers on what you should consider when you are evaluating home loan interest rates.
What is a home loan and EMI?
When a bank or NBFC lends a customer money for the purpose of buying or building a property, the loan is known as a home loan. The loan is repaid by way of EMIs (Equated Monthly Installment). It is the amount you need to pay on a monthly basis to repay your entire loan including the interest accrued.
If you feel your EMI burden is too high, then you have the option to reduce it by lengthening the tenure of the loan. If you choose this option then keep in mind that you will be paying out more in interest amount since your repayment obligation is over a longer period.
Kind of interest rates
A home loan comes with two different kinds of interest rate. You need to study all the interest rate options carefully before deciding which one to choose. Check with your lender to make sure that you know the terms and conditions associated with each type of interest rate.
Fixed Interest rate: You pay one fixed interest rate for the entire tenure of your loan and you have a fixed EMI for the entire duration of the loan.
Floating Interest rate: The interest rate you pay varies during your loan tenure and is determined by external market conditions. You can choose this option if you are confident that interest rates will go down during your loan period.
There is also the option of a partially fixed and partially floating rate. Talk to your potential lender to learn about all the options or consult a professional to decide which option suits your financial needs the best.
Still Confused and Need Help?
Choosing the home loan with the best interest rate can be daunting, given the number of options available. If you think you need help with choosing the right home loan with an interest rate best suited to your particular needs, CreditMantri can guide you through the entire process and match you with the best offer that you are qualified for.