Fixed v/s Floating: The best option of interest rate for first time homebuyers
Buying your first home is one of the most major financial decisions you will ever take in your life. It could be extremely daunting, but hundreds of people have been there and survived. All you need to do is a little bit of homework that can help you find the best possible home at a price that you can afford.
Selecting a loan to invest is the first step towards your dream home. In order to prepare yourself for this important milestone, your homework starts here. Among other details, the first and the most important factor to note before signing up for a loan is knowing the interest rate. Potential homebuyers can choose between two types of interest rates – fixed interest rate and a floating interest rate. This interest rate for the repayment of your home loan depends on a variety of factors. Here’s a parallel between Fixed and Floating Interest Rate that can help you make a more informed decision before investing –
Fixed Interest Rate
Simply put, a fixed interest rate is one where the interest amount is fixed and does not change depending on the market fluctuations. This interest amount is paid on a monthly basis at the start of the month, in equal installments over the entire tenure of the home loan.
• The interest rate remains constant.
• Not affected by financial market conditions.
• Fixed EMIs, so you can plan your annual expenditure.
• Relatively lesser risk.
• High interest rate.
• Fixed rate, so if at all the interest rate reduces during your repayment tenure, you will not get the benefit of it.
Best suited for short term home loans.
Floating Interest Rate
This type of interest rate is volatile and varies as per the market scenarios. It depends on the base rate fixed by several banks/lenders, so whenever the market trends change, the interest rate also automatically changes.
• Low interest rate, which helps in generating savings.
• Fluctuating rate, so if the interest rate reduces during your repayment tenure, you will get the benefit of it.
• The interest rate varies based on market fluctuations.
• Varying EMIs, so it is difficult to plan your annual expenditure.
• Relatively higher risk.
Best suited for long term home loans.
Both fixed and floating home loan rate come with their set of pros and cons. It all depends on how you spend your money and what suits you. Most homebuyers these days are opting for floating interest rate loans and willing to take risks. Nonetheless, it differs for different individuals. No matter what you choose, be mindful of what is best for you and your family in the long run. Thanks to increasing opportunities and growing infrastructure, Chennai has become the new preferred choice for first time home seekers. The new residential projects in Chennai offer a balance of spacious luxury homes, self-sufficient neighbourhoods and beautiful views, all for different budgets and preferences. Perfect for new homebuyers, these apartments in Chennai can be invested in with the help of both fixed and floating interest loans.