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Fixed or floating: Which one is better PowerPoint PPT Presentation

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Fixed or floating: Which one is better

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Housing Loans

Fixed or floating: Which one is better

  • Fixed or floating

  • Even in fixed rate, there are two types—one that stays constant throughout the loan tenure and the interest charged is higher. In the other type, banks review the fixed rate periodically and the rate of interest is slightly lower.

  • Since home loan is for a longer tenure —20-25 years—a borrower must compare various parameters and then decide on the type of interest rate.

  • Advantages of fixed rate If the objective is to protect oneself from interest rate fluctuations, fixed rate will make sense.

  • If you are comfortable with the current EMI and expect higher income, then you can opt for fixed rate to avoid potential rate hikes.

  • Disadvantages of fixed rate Borrowers have to pay higher rate for fixed rate Housing Loans as compared with floating rate loan.

  • As the tenure of the loan is long, if interest rate falls, the borrower of fixed rate will lose out and continue to repay the same amount. 

  • Check with banks

  • Check with the bank whether the fixed rate home loan is fixed for the entire tenure or only for a few years.

  • Banks also offer the option of switching from fixed to floating for a fee. 

  • Source: http://www.financialexpress.com/economy/fixed-or-floating-which-one-is-better/439525/

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