One of the most important things to consider while going for a home loan is the applicable interest rate. There are various types of interest rates offered by a financial institution for your convenience. You can opt for any type on interest rate depending on you ability to repay the loan. Let’s have a look at various types of loans prevailing in the market.
Fixed Interest Rates on Home Loans
As the name suggests, the interest rate on your mortgage would be fixed if you opt for this type of loan. Hence, the amount you pay every month as installment is non-variable. For people on a budget, this is a very good option as they would be able to set aside a fixed amount every month. This is also good option for people with fixed income as they don’t have to worry about sudden hike in interest hike.
Adjustable Interest Rates on Home Loans
In this type of loan, interest rates are not fixed, i.e. it’s variable. So, the installment amount you pay every month would vary depending on the market movements. Although it is variable, the interest rate cannot rise beyond a certain level. This is usually preferred by many people as fixed rate can prove to be a bit costlier than variable rates. If, however, there is a rise in the interest rate, you will have to pay more.
Capped Interest Rate on Home Loans
Here, the receiver of the loan would need to pay an accumulated interest rate based on fixed rate procedure. If, however, the rates fall beyond the capped amount, the borrower has to pay less.
Discounted Interest Rates on Home Loans
If banks offer discounted interest rates, obviously everyone would borrow such loan. It is, however, offered by few banks and for a limited period of time. Recently many banks provided
To get the best deal available in the market, You must compare all the types of loans provided by all the banks and select the best one according to your needs. Few banks would agree to provide a customized loan based on your requirements. However, interest rates on home loans offered by a bank vary from individual to individual as credit score is a big factor influencing loan rates.