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Types of housing loan interest rates

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Title: Types of housing loan interest rates


1
Housing Loan Interest
2
Types of housing loan interest rates Purchasing
a house has is and always will be an expensive
affair. With the introduction of home loans in
the market, it has become relatively easier and
has been less burdensome to purchase a house on
their own. When the person takes a loan from the
bank to buy a dream house, he has to choose the
interest rate he would prefer to go with while
repaying the loan amount to the lending
institutions. Namely there are two types of
interest rates, fixed house loan interest rates
and the floating rates. Before we would
understand which housing loan interest rate is
better, let us understand what house loan
interest rates are.
3
Fixed interest rate As the name suggests this
type of house loan interest rate remains fixed
either for the entire term or a part of a
specific period of time which is irrespective of
the interest rate going in the market. Floating
interest rate The floating interest rate is
linked to the market interest rates. If the
interest rate in the market increases, the
floating interest rate also increases. If the
market interest rate decreases the floating
interest rate also decreases. Both the interest
rates have their own advantages and one should
opt for the own which suits his needs.
4
Fixed interest rate When the market interest
rate is predicted to rise in some near future you
must resort to fixed house loan interest rate.
The interest rate will remain fixed for the
duration of the loan and the individual can save
on the difference. The fixed interest rate is
an advantage for the individuals who want a fixed
monthly expense. It is for the people who dont
want to take any risk which is attached to the
repayment of the home loan in case the market is
on a rise. However, in case if the house loan
interest rates are expected to fall in the future
the individual must not go opt for fixed interest
rate. This is because he will be paying the same
rate of interest over the home loan even when the
market interest rates are on the decrease
5
Floating house loan interest rate When the
interest rate in the market is predicted to fall
in the future the person must go with the
floating house loan interest rate. When the
market interest rate falls, it is but obvious
that the floating interest rate will fall and
enable the individual to spend less and save
more. However the rate of interest is varies
and fluctuates from time to time. This is a bit
risky for the borrowers with a fixed income, in
case of the floating house loan interest rate as
it might create unpredictable high monthly
expenses.
6
Which one should an individual choose? After
having a brief look at what these interest rates
are, lets have a look at which one is more
advisable for the individuals taking home loan.
Before he picks up one of the housing loan
interest rate it is imperative to compare the
interest rates both floating and the fixed which
are offered by the different lending
institutions. A sizeable chunk of borrowers
prefer the floating interest rates because they
are very much optimistic about the market
conditions and the fall in the interest rates in
the future. Also in case the market rate
increases, it is apparent that it will fall
sooner or later in future. Also what type of
interest rate to go for depends on the borrowers
capacity to repay the loan and the risk he is
willing to take and also the prevailing
conditions in the market.
7
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8
Housing Loan Interest
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