by Shreekant Rao
Published Wed, Mar 22nd 2017, 15:08 | Finance
The biggest question that prospective home loan aspirants find themselves battling with at the stage at which they are looking for the best home loans in India is whether they should opt for a fixed or a floating interest home loan? It is natural that home loan interest rates will be the matter of your primary concern when you are comparing home loans because they determine how you will plan your finances for the long term.
If you too are confused about whether the fixed or floating rate option is better for you, we have some key points that can help you determine which one is the better option for you. You should opt for a fixed rate home loan in the following scenarios.
Uncertainty is not your cup of tea
If you are the kind of person who wants to know for certain what your monthly outgo is going to be and you do not want fluctuation in interest rates to cause a difference to your money outflow for the tenure of your loan, going in for the fixed rate option is certainly the right choice for you and that is what you should choose when you are checking out types of home loans.
Your EMI does not exceed more than 30% of your salary
You have opted for a home loan after much consideration and are comfortable with the monthly outgo of EMI through Emi Calculator. Usually, those who opt for a fixed rate of interest do not want their EMIs to exceed to 30-35% of their salary and want that aspect to remain the same thus choose the fixed rate options while deciding upon home loan interest rates.
You do not see yourself pre-paying the loan
Although a lot of people take a home loan with an expectation of prepaying their home loan off in 5-7 years because they do not want to live under a debt burden, there are others who think it is wiser to keep servicing their loan for the long tenure as it gives the considerable tax benefits. If you are in the latter category, and do not see yourself doubling over with worry over pre-payment of your loan, the fixed rate option is for you.
If you do not identify with what has been said so far, then a floating rate of interest may be better for you while deciding upon home loan interest rates. Let’s find out if you are more likely to identify with the following:
Your knowledge of interest rate movement is fairly sound
If you are the kind of person who keeps track of the macroeconomic situation and have a grasp of what interest rate movements are and how they impact you, you would obviously would not want to be locked in a high interest rate regime while selecting your home loan. Especially if you think that interest rates are in a downward spiral and you would like to adopt the wait and watch stance, a floating rate of interest on your home loan would be the perfect choice.
[Source: https://www.creditsudhaar.com/blog/2016/08/02/fixed-vs-floating-rate-on-home-loans-what-is-better-for-you/]