You have to go through a series of decisions when it comes to buying a home. There is no denying that your choice of financing a house will have an impact on your life for decades. Once you decide to buy a home and you have already spotted the best property for you, the crucial decision comes and that is finding affordable home loans. Well, it is pretty much clear that you need a financing option to fund your investment.
Finance The Major Purchase of Your Life with Home Loans
In today’s unpredictable world, you can predict a happy future ahead with home loans. Nowadays, financing the major purchase of your life is not at all a complicated affair anymore. The finances are conveniently available and you can buy your dream home with the least possible hassles. Generally, everyone knows that a home loan is a reliable financing option for real estate investment. However, borrowing is not as easy as it sounds. There is a lot to decide and don’t forget your choice today will decide your financial stability tomorrow.
In the context of home loans, the rate of interest is everything. It will not just decide your financial stability but also predict your future in a new home.
Are Interest Rates Really a Concern?
Obviously, interest rates play a vital role in deciding your future on buying your dream home. After all, you have to repay the borrowed amount. In short, interest rates are really a concern for everyone. Thus, you should pay attention to the interest rates charged by the lender. When you choose home loans, you will come across terms floating interest rates and fixed interest rates.
Making choice between floating rates and fixed interest rates might sound tough. However, you don’t have to look confused, as this guide is just meant to help you. Some pointers are there that could help you make the right decision on floating and fixed interest rates.
Fixed Interest Rates and Their Benefits in a Glance
As it is suggested by the name, the rates of interest will be fixed at the time of borrowing. In the context of fixed interest, the rates will be constant over the entire tenure. However, variants are available and leverage you to decide the interest rates for a specific period of 2, 3, or maybe 10 years. The rates of interest remain the same throughout the repayment tenure. This means that it will bring you a sense of certainty, as you know what you have to repay right from the time of taking out a loan. It will surely give you the confidence to plan your budget or expenses accordingly. Moreover, the repayment will be manageable and you can meet your financial commitments with relative ease.
As compared to floating rates, the fixed rates are a bit higher. However, you should understand when fixed rates will be good for you. Let’s have a look at the circumstances in which you should opt for fixed rates:
Floating Interest Rates and Their Advantages
Floating interest rates are also known as adjustable-rate home loans. Linked to the lender’s benchmark rate, these interest rates move in sync with the market interest rates decided by RBI. The interest rates will change proportionately if there is a change in the benchmark rates. In the context of these loans, the interest rates will be reset at specified intervals be it a calendar period or half of a financial year. You can understand it as if there is a change in the market rates; the interest will also be reset higher or lower based on the market price.
According to financial advisors, you should opt for floating interest rates in the following circumstance:
If You Are Unsure about the Right Choice
Making the right decision between floating and fixed interest rates will not be easy. However, you still can seek guidance to make the right choice. If you are confused about which loan option will suit your preferences, you can go with a combination loan in which a part is fixed and part floating. You should go with this option if you already have other repayments to make. During the first 3 to 5 years, you can opt for fixed rates and after that, you can go with a floating option for the balance tenure of home loans.
This way you can make borrowing easy and get affordable home loans in a fuss-free manner. If you still have doubts in mind, you should reach out to financial advisors to seek much-needed guidance. Therefore, don’t panic and be ready to make the major investment of your life with home loans.