3 Factors you should be aware of about Home Loan Interest Rates

Owning a home is a wish everyone has. These days there are quite a few financial institutions and banks that are ready to lend a home loan. But when considering a home loan one has to keep in mind whether he will be able to make regular EMI payments or not.

While applying for a home loan make sure to thoroughly consider all the ups and downs of the terms and conditions. Try to find banks that offer less home loan interest rates. This is because home loan rates will be a major factor that will dominate the total amount of repayment one does.

Hence, here a 3 factors related to home loan interest rates, which will help one make a better choice with regard to the home loan you take-

1. Make a choice between fixed or floating home loan rates- This is an important factor to think about when considering housing loan interest rates. One can either opt for a fixed interest rate on the home loan, or a floating/variable interest rate. In case of a fixed rate, the interest rate stays the same throughout the tenure. On the other hand with a variable rate, the rate of interest tends to change after very quarter, depending on the market.
When making a choice between the two rates, make sure to find out the current market trends affecting the interest rates.

2. Fixed or floating, interest rates may be likely to change- It has been established that floating rates are revised by banks after every quarter. This revision in the rates is done as per certain guidelines set down by the Reserve Bank of India. But, most of the banks are allowed to change fixed rates too if they want. In this case the borrower cannot take much of an objection. This factor should be carefully considered while choosing a home loan.

3. Existing customers pay a higher interest rate than new customers, even if the interest rate falls- This is because banks altar the floating interest rate on the basis of market trends, but they cannot change the margin at which they have lent money to a borrower. This may tend to happen in case of only a few lenders, depending primarily on the kind of price methodology each lender follows.

These 3 factors should be kept in mind when looking at home loans. When looking out for lower interest rates, know that one can also opt for a balance of transfer during the tenure of the loan to another bank offering a lower rate.