Home Loan Interest Rates In 2023

This is another popular type of home loan interest rate today in India. Floating house loan nterest rates follow the prevalent market rates. When the interest rate drops, your home loan EMI also drops.

Benefits Floating Home Loan Rates

1. Lower Interest Rates : Floating home loan rates are typically 1% to 2.5% lower than fixed rates (from the same lender). This can help you save money each month on EMIs.
2. The Possibility for Greater Gains : Borrowers can stand to gain unexpected gains: Borrowers who choose the floating interest rate can benefit from market fluctuations. If the market rates go below the base rate, there will be an even lower home loan rate for the corresponding period.

Setbacks of Floating Home Loan Rates

1. If the market rates go above the base rate, the borrowers will lose their current home loan interest rates and have to pay a higher interest amount.
2. The increase in housing loan interest rate may make monthly payments quite steep—even perhaps to the point of becoming unmanageable.
3. Budgeting cash flow and calculating the long-term costs of borrowing with floating house loan rates is not possible.

This type of housing loan interest rate remains constant for the complete tenure of the loan. Fixed home loan rates are set and not subject to change owing to market fluctuations. Also, for certain cases, after paying a fixed housing loan interest rate for a certain time period, it may be possible to convert it into a floating housing loan interest rate depending on loan terms.

Benefits of Fixed Home Loan Interest Rates

1. The biggest benefit of fixed house loan interest rates is that borrowers know exactly how much they have to pay. Even if the market fluctuates and makes house loan interest rates higher, your set interest remains unaffected.
2. With fixed home loan interest rates, borrowers know exactly how much they need to budget for, and can align their finances well in advance to pay off their loan.

Setbacks

1. The flipside of fixed house loan interest rates is that even when the home loan interest rates in India drop, the agreed rate remains the same. Borrowers cannot benefit from lower interest rates on their home loans.
2. When compared to floating interest rates, fixed home loan rates tend to be higher by about 1-2.5%.