Everyone wishes to own a house; it’s one dream which is common amidst all. Earlier, getting your own home required saving the needed amount of money as home loans were not an easy process back then. Moreover, home loans were not readily available for all. Only a particular section enjoyed this provision and could manage to own a house.
However, things have changed for better now as today anyone can get a home loan. The process has become less complex – but it becomes a tad difficult to choose the right option for a home loan. If you are in need for a home loan, it’s very important that you study the market thoroughly and analyze each aspect very carefully. More so, one thing that holds great significance when applying for a home loan is the choice between a fixed rate home loan and floating interest rate.
Of the two options, fixed rate home loans are highly talked about. So, let us here explore this loan type in detail and understand what advantages and disadvantages it comes with.
Everything You Need To Know About Fixed Rate Home Loans
Fixed interest rate home loans refer to repayment of the taken home loan in preset identical installments throughout the course of the loan tenure. When you apply for a fixed rate home loan, the interest rate never changes even when the market shows any kind of fluctuations. The loan tenure is divided into two parts; wherein the initial months cater to the interest and the later months cover the principal amount.
• No change in interest rate, even if the market shows fluctuations
• Perfect for people who can manage monthly fixed budgets easily, and can repay in a fixed budget manner
• Provides you assurance and security
• Allows you to plan your monthly budgets to meet the loan repayment requirements
Cons Of Fixed Rate Home Loans
• As it is the case with everything, fixed rate home loans also have their set of drawbacks. One major con with this loan type is that it stands to be 1-2.5% higher when compared to floating rate home loan.
• The monthly loan amount stays fixed in this loan type, so if the market experiences a reduction in interest rates on home loans; the same won’t be applicable to fixed rate home loans.
Important Things To Consider When Applying For This Loan Type
• Even the market experts believe that fixed rate home loans are a feasible choice as they allow individuals to manage their expenses and loan amount in an organized way.
• If you are looking to apply for this loan type, then you must first check with your bank whether fixed rate home loan remains fixed for the complete loan tenure or it’s limited to certain years.
• Fixed rate home loans indeed come handy if the market interest rates are prone to rise every now and then. With a fixed budget, you can always manage to repay the loan timely without having to disturb your budget.