Interest Rate Types and Ways To Get a Lower Interest Rate On Your Home Loan

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Getting a home loan is a big financial decision, and finding the best interest rates can save you thousands over the tenure of your home loan. Interest rates can vary greatly from lender to lender, so it is important to shop around and compare offers before making a decision. 

By going through this article, you’ll be well on your way to securing a home loan with a low interest rate that fits your budget and financial goals. The lower the home interest rates, the better the home loan offers that you will be able to pick from. 

The importance of home loan interest rates 

Besides the home loan amount, the home loan interest rates show us how affordable the loan agreement truly is. If the loan interest rate is low, the amount will be easier to repay. Therefore, when looking for home loan offers, take a close look at the interest rate charged and any other additional hidden charges as part of the loan agreement. 

The better you understand these nitty-gritty details of the loan agreement, the better deal you get. Before you choose your loan partner, make sure the terms and conditions are transparent and the home loan interest rates are lower. If this estimation is not done properly and it does not fit into your budget, the home loan can topple your financials and turn out to be a burden. 

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What are the types of home loan interest rates? 

There are two types of home loan interest rates that you might come across. The interest rate could be fixed or floating. Consider the type of interest that the loan comes with and decide after comparing it with the other type of the interest rate being charged. 

Fixed loan interest 

A fixed loan interest rate is a type of interest rate that does not fluctuate with the influence of external market factors. It remains fixed throughout the loan repayment tenure, and the borrower does not have to use any variable. The advantage of the fixed loan interest is that you can forecast the loan instalment amount you need to pay each month and have to pay a fixed amount monthly. 

This is a good choice for people who like to be certain about the EMI amount and plan their financial budget. Fixed home loan interest might make loan repayment easier and does not cause any instability with the financials of the borrower. However, when compared with the floating interest rate, it can be higher. 

But, in the long run, a fixed home loan interest rate is an advantageous option. Opting for a fixed interest rate can be beneficial when the initial rate of interest is low and it has been locked down. If you want stability and do not wish to spend your days taking out interest rate calculations, then the fixed rate provision is a good choice. 

Floating home loan interest rate 

The floating home loan interest rate is different from the fixed rate of interest charged. The floating home loan interest rate is variable and can go up or down with market conditions. The interest rate and the interest amount might differ from time to time during the loan tenure. However, this does not mean that it is a disadvantage. If the interest rate falls for some months, it can help the borrower save a lot on the interest payments. 

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When the interest rate increases, you might have to pay higher EMIs, but the rates can also take a negative trend, and this can lead to a significant drop in the loan EMI for those months. The floating home loan interest rate is not too different from the fixed loan interest rate if you have opted for a long-term loan repayment tenure. 

This is because over a long tenure, the rise and fall even out, and you spend more or less the same amount while repaying the loan. If you are opting for a short-term home loan, the floating home loan interest rate can help you save money. Moreover, if the variable of interest is increasing further repeatedly, the borrower can even ask the bank to extend the loan repayment tenure. 

If you are well versed in the real estate market and the fluctuations that might come, then you should opt for the floating interest rate. Before agreeing to the floating interest rate, make sure you are not going for a blind deal and that the terms and conditions are clear. 

How to reduce home loan interest rates? 

Whether you opt for a fixed one or a variable one, the interest rate will add to the loan amount and be a liability during repayment tenure. The best way to save money on home loan interest rates is to get a lower interest rate. If you have already opted for a home loan that has a very low-interest rate, then it will save a lot of money for you. However, there are other ways of reducing home loan interest rates too. 

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Before you opt for a home loan, always shop around and compare different home loan offers and interest rates charged by different banks. Only after a complete comparison, finalise a loan offer.