Fixed rate home loans - By: Habibulla

Once a person decided to purchase a home, the next most important thing is the finances necessary to purchase the home. The enough availability of home loans in the market makes it very much possible. But, the thing always strucks in mind which is that home loan rates. Basically, there are two types of rates that are commonly offered by the lenders-fixed rate and floating rate.

Fixed home loan rate is the best option for who is not comfortable with floating rates. Under this scheme, the home loans are available with fixed rate of interest for a given period of time. It doesn't change even if the economy situation of the country changes. This means the same EMI has to be paid. The paying fixed amount to the lender can be an advantage at time when the interest rate increases. This can save enough money as even 1% increase in the interest rate.

For the planning and budgeting, fixed interest rate is a good option. The borrower knows about what has to be paid monthly payment for the loan. This will help borrower to maintain monthly household expenditure. These are the most common advantages of the fixed rate home loans. In case, the interest rates comes down, the benefits of lower interest rates are not applicable for the fixed rate home loan borrowers, because the rate of interest is fixed for the entire period of the loan.

Today, the interest rates stops settling down. That's why people wants security and go for a fixed rate home loan. But, it is difficult to find the pure fixed rates, because the market is flooded with combo offer of fixed and floating. These offers are available for new borrowers.

There are two basic types of fixed rate home loans-
Fixed rate ( for 3 years)-
The rate of interest is fixed for the initial three years then changed to floating interest rate.
Fixed rate ( for 5 years)-
The rate of interest is fixed for the initial five years then changed to floating interest rate. The five year fixed rates are slightly higher compared to three year fixed rate.

About the Author

Habibulla Antule is a financial advisor and consultant and have provided his expertise to many financial institutions for loans and insurance

Article Directory Source: http://www.articlerich.com/profile/Habibulla/42000

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