look news india
Buying a house is the biggest and most beautiful dream of everyone’s life. But the home loan taken to realize this dream is also the biggest financial decision of your life. This is where a question comes which has a direct impact on your pocket – should you keep the interest rate fixed or floating?
This is not just a small election. This is a decision that will decide what your EMI will be for the next 20-25 years and how much total money you will pay to the bank. Let us understand this in very simple language.
Fixed rate: Means straight path, no tension
As the name suggests, fixed rate means that the interest rate on your home loan will remain the same from beginning to end.
- What is the benefit? The biggest advantage is mantle pieceWhether RBI increases or decreases interest rates, your EMI will not be affected. Only a fixed amount will go out of your pocket every month, which makes it very easy to make a household budget. This is best for those who do not want to take any risk.
- What is the harm? Usually fixed rates compared to floating rates. 1 to 2 percent costlier It happens. And the biggest loss occurs when interest rates start falling in the market. Imagine, the whole world would be taking advantage of low interest rates and you would be stuck at the old expensive rate.
Floating rate: A path of ups and downs, thrill and risk together.
Floating rate means that your interest rate will vary according to the market. When RBI changes its policies, your EMI may also increase or decrease.
- What is the benefit? it cheap in the beginning It happens. If interest rates reduce in future, your EMI will also reduce and you can save lakhs of rupees. Most people prefer this for long term loans.
- What is the harm? the biggest risk This is it. If interest rates increase, your EMI burden will also increase, which can spoil your entire household budget. As has happened with many families in recent times.
So then, what’s right for me?
There is no single answer to this. It depends on your own financial situation and risk appetite.
- Choose fixed rate if…
- Your monthly income is fixed and you do not want any change in EMI.
- You are nearing retirement and do not want to take any financial risks.
- You are afraid of the uncertainties of the future.
- Choose floating rate if…
- You are at the beginning of your career and your salary is expected to increase in the future.
- You are able to handle small fluctuations in EMIs.
- You think interest rates will go down in the long run.
A smart move: If you had earlier taken a fixed loan at a higher interest rate and now the rates are lower in the market, then you ‘Balance Transfer’ Through this you can switch your loan to another bank at a lower floating rate. Yes, there is a small processing fee involved, but it can prove to be a profitable deal in the long run.
Ultimately, the decision is yours. Take any decision considering your pocket, your needs and your goal, so that your dream home brings you happiness and not financial stress.