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STAY FIXED OR FLOATING.

ARE YOU finding it hard to decide whether to go for a fixed home loan or a floating rate? Here's some advice that can help you choose the right kind of loan for yourself.

Fixed interest- rate home loans allow repayments in fixed equal monthly installments.

The interest rate on such loans doesn't change with market fluctuations. A fixedrate home loan is excellent for those who are good at budgeting and insist on a fixed monthly repayment schedule, which is easy to account for and doesn't fluctuate. The major drawback of the fixed- rate option is that it is usually 1- 2.5 per cent more than the floating- rate home loan. And if for any reason the interest rate drops, the fixed- rate home loan doesn't benefit from the rate reduction. The biggest benefit of floatingrate home loans is that they are at least 1- 2 per cent cheaper than fixed interest rates.

Even if the floating rate goes over the fixed rate, it will be for some period of the loan and not for the entire tenure. The biggest drawback of the floating interest rate is the uneven nature of monthly installments.

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Publication:Mail Today (New Delhi, India)
Date:Aug 19, 2012
Words:210
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