Home Loans: Floating rate or Fixed rate?

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Which home loan is best fixed or floating
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Home Loans Floating rate or Fixed rate?
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Lot of people will be wondering, whether to go
for fixed rate interest or floating rate for a
Home loan. In the below article we will try and
help sort the difference between two and which
one is the best suited in the present scenario.
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So what is fixed rate and floating rate?
Fixed Rate A Fixed rate home loan is a loan
where in theoretically the rate of interest on
home loan is fixed for entire tenure of the loan.
But in most cases in Indian banks its fixed for
a period of 3 to 5 years and readjusted with PLR
after that. One
Floating Rate In floating rate the interest rate
on loan keep on changing as per the Prime Lending
Rate (PLR), where in if the PLR increases the
floating rate also increases at the same time.
But if the PLR decreases the interest rate on the
loan also decreases.
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So, which loan to go for? Floating rate or fixed
rate?

• Well the answer lies in two things
• Tenure of the Loan
• 2) Present Interest rate cycle

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The present Prime Lending Rate is approximately
at around 11.75 for Home Loans. Well most
people end up buying fixed home loans when the
cost of interest is high and floating rate when
the cost of interest rate is low. "So which home
loan is best fixed or floating" we will discuss
another time.
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At the same time one must understand that
historically highest interest rate have been in
the region of 12-14 and lowest in the range of
8. So one can easily expect the interest rate to
start falling from 1st quarter of FY 2012 and
bottom out by FY 2013 or 2014.
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• So what is the best strategy?
• One should go for floating rate till the interest
  rates bottom out at around 8
• And convert it to fixed after 2 year there by
  protecting oneself against a rise in rate after
  that.
• The good news is that RBI has waived off
  prepayment charges, thereby making it easier to
  shift between the two.
• The above strategy is useful for those who wish
  to go for 5- 7 years of Home loan tenure.

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For more details about Which home loan is best
fixed or floating Visit below link
https//www.hdfc.com/blog/opt-fixed-rate-floating-
rate-home-loan/
http//reformistindia.blogspot.in/2011/10/home-loa
ns-floating-rate-or-fixed-rate.html
Source
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