Interest rate is one of the main criteria to chose as to which lender offers you the best deal for your home loan requirements. There are three kinds of interest rate methodologies available for you to choose from – Fixed Rate, Floating rate and Hybrid loans.
I. Fixed Rate: Under this system of rate of interest, a fixed rate of interest is charged for the duration of the loan. You may want to check the terms and conditions associated with a fixed rate product. At times, the fixed rate is applicable only for a limited number of years, which can defeat any assumptions of certainty that you may want to build into your financial planning.
II. Floating Rate: Floating rate of interest as the name suggests, is a system where the rate of interest is linked to a base rate or benchmark rate and can go up or down with changes in such base rates.
Hybrid Loans: This is a fairly recent model of loan repayment that has gained reasonable popularity. Under this system of repayment, the rate of interest charged during the initial few years of the loan is low, and gradually increases in line with changes in base or benchmark rates.