Fixed or Floating: Which Home Loan Interest Rate You Should Opt For?
If you are planning to apply for a home loan, here are a few tips to help you decide between floating and fixed interest rate.
Deciding between floating and fixed interest rates is quite a dilemma for many homebuyers. Whether you are looking to fund your education, business or a new home, the interest rate choice is a crucial step in the process of financing your needs. While applying for a home loan, you can either choose a fixed interest rate or a floating interest rate. In this blog post, we’re discussing the factors you should consider to make a suitable choice.
A fixed interest rate means you repay your loan amount with a fixed percentage of interest and in Equated Monthly Instalments (EMIs) for the entire tenure. The methodology is considered safer because it provides protection against fluctuations. On the other hand, a floating interest rate implies that the rate of interest is subject to revisions depending on economic scenarios. The rate was earlier linked to the marginal cost of funds-based lending rate (MCLR) but now it’s pegged to an external benchmark, the base rate.
Following this logic, if the interest rate in future economic cycles is expected to rise, it is advisable to opt for a fixed interest rate on your borrowings. However, it is important that you read the terms and conditions attached to your loan documents since certain banks can reset the interest rate or link to a floating rate after a fixed period of time.
A fixed interest rate provides the advantage of rate stability throughout the tenure (with some exceptions) which in turn helps you calculate the required budget for easy repayments. However, if the interest rate cycle goes down, you cannot access the benefits related to the lower rate of interest. You could opt for a fixed home loan interest rate if you prefer to go for a fixed repayment schedule and if your proposed EMI is less than 30 per cent of your monthly income. It’s a safer option as it shields you from interest rate fluctuations in the market.
While a floating rate seems like a gamble, it has many other benefits. Floating interest rates are typically 1 to 2.5 per cent lower than the fixed rates. Choosing a floating rate can result in savings over the loan tenure since the rate varies in accordance with the interest rate cycle fluctuations. However, the downside of floating rate option is that it becomes difficult to plan out and budget your finances over the tenure of the loan. It could be a challenge to arrive at an accurate prediction of your future monthly payables. You must choose a floating home loan interest rate if rates are expected to go down in near future or if you want your repayments to depend on market rates due to a lack of expertise on interest rate cycle fluctuations.
Choosing between a floating or fixed rate loan is a very important decision which should be made only after taking into account various factors, including your ability to take the risk. While both types of interest rates come with their own set of pros and cons, you should select the one that complements your requirements the most. The fixed interest rate can give you a sense of security and ease your mind; while its counterpart could help you access unexpected financial gains arising out of interest rate fluctuations.
You should also consider various loan plans available with the concerned financial institution before making the final decision. If you are still not sure as to which interest rate type suits you the best, you have the option to take on a loan and change between the fixed and the floating rate at a later date. However, many lenders levy a nominal fee for switching the interest rate type. Even as your choice of interest rate impacts the cost of acquiring an asset through loans, you have the flexibility in selecting the right type throughout the tenure as per your financing needs.
- Aadhar Housing Finance has been awarded and recognised as ‘The Best Brand 2021’ at the 4th Edition of ‘The Economic Times – Best Brands 2021’ held at Sahara Star in Mumbai on 21st December, 2021.
- Aadhar Housing Finance was conferred with the 'CSR Times Award 2021' for the successful initiatives implemented under its CSR project, ‘Aayushmaan Aadhar’ at the 8th National CSR E-Summit, on 17th December, 2021.
- Aadhar Housing Finance was conferred with 'India CSR Leadership Award 2021' on 10th Dec, 2021 in 'Community Health' category for its impactful community-centric initiatives conducted under Aayushman Aadhar project.
- Aadhar Housing Finance has received ‘Maharashtra State Best Employer Brand Award, 2021’ at the 16th Employer Branding Awards hosted on 23rd Nov, 2021 by World HRD Congress for our exemplary work in HR. Aadhar has translated and combined vision with action leading to better people strategies and cultivation of competencies in order to enable the organization to be future ready.
- Aadhar Housing Finance Ltd bagged 5 awards across below categories at ‘Banking Frontiers NBFC Awards & Conference 2021’ (DNA Awards 2021) virtual summit held on 20th Aug, 2021. 1) Best Cyber Security Initiative - 1st Prize 2) Best API Initiative - 1st Prize 3) Best Omnichannel CX Initiative - 2nd Prize 4) Best Cloud Initiative - 2nd Prize 5) Esteemed Trophy (IT & Digital Group)
- Awards & Recognition: We received two prestigious awards at the 7th Edition of ‘National Awards For Excellence in BFSI 2021’ which was held virtually on 26th Aug 2021, in mentioned categories: 1) Aadhar Housing Finance Ltd received the ‘Affordable Housing Finance Company of the Year’ award, 2) Shri Deo Shankar Tripathi, MD & CEO, Aadhar Housing Finance Ltd has was conferred with ‘CEO of the Year’ award.
- Awards & Recognition: For the Second consecutive year, Aadhar Housing Finance has been certified as a ‘Great Place To Work’ by Great Place To Work Institute, a Global authority on recognizing high-trust and performance driven culture at workplaces.
- Awards & Recognition: Aadhar Housing Finance is certified as a ‘Great Place To Work’ by Great Place To Work Institute (India). This is a significant milestone for Team Aadhar as ‘The Great Place to Work Model’ is the world’s most researched, accepted and sustainable definition of a great workplace from an employee’s point of view. It is a comprehensive framework encompassing the overall employee experience ecosystem.
- Awards & Recognition: Aadhar Housing Finance won for the 3rd year in a row at The Outlook Money Awards. Team Aadhar received the Silver award in the Affordable Housing category at the Outlook Money Conclave held in Mumbai on 27th Feb, 2020.
- Awards & Recognition: Shri Deo Shankar Tripathi, MD & CEO, Aadhar Housing Finance received the ‘Top Most Influential BFSI Leaders’ award at the World BFSI Congress & Awards, in Mumbai on 14th Feb 2020.
- Awards & Recognition: Shri Deo Shankar Tripathi, MD & CEO, Aadhar Housing Finance received ‘the NBFC Leadership Award 2020’ at the 8th NBFC 100 Tech Summit held in Mumbai by Banking & Finance Post and Elets on 23rd January 2020.
- Awards & Recognition: The Aadhar Annual Report 2018-19 wins all India 3rd Prize in the PRSI National Awards 2019 at the 41st All India Public Relations Conference – Hyderabad
- Awards & Recognition: Aadhar Housing Finance is one of the ‘Best BFSI Brands 2019’: Aadhar Housing Finance received ‘The Economic Times Best BFSI Brands 2019’ award at the India-UAE Strategic Conclave 2019 held in Dubai on 15th October, 2019
- Awards & Recognition: Aadhar Housing Finance received ‘The affordable Home Loan Provider Of The Year 2018’ award from Union Minister Shri Nitin Gadkari at Outlook Money Conclave in Mumbai on 12th March, 2019 for the exemplary work in supporting the ‘Housing for All’ mission in India.
- Aadhar Housing Finance received the Prestigious ‘PMAY Empowering India Award 2019’ from Union Minister Shri Hardeep Singh Puri in Delhi on 5th March, 2019 for its exemplary work in supporting the ‘Housing for All’ mission in India.
- Dun & Bradstreet included Aadhar Housing Finance in 'India's Leading BFSI Companies 2019' list. The report was published by Dun & Bradstreet Information Services in March, 2019.
- Aadhar is declared one of the 1) ‘DREAM COMPANIES TO WORK FOR’ (Financial Services) and 2) ‘DREAM EMPLOYER OF THE YEAR’ presented by ET Now on 16th Feb, 2019 at the World HRD Congress in Mumbai.
- Shri Deo Shankar Tripathi, MD & CEO, Aadhar Housing Finance was recognized and felicitated as one of ‘100 Top Most Influential BFSI Leaders’ at the ‘World BFSI Congress’ held in Mumbai on 14th Feb, 2019.
- Aadhar Housing Finance bagged the ‘Most Promising Brand For Housing Finance’ award at the ‘World BFSI Congress’ presented by ET Now in Mumbai on 14th Feb, 2019.
- Aadhar Housing Finance won ‘Prestigious Brands of India 2019’ award at the conference held at Sahara Hotel in Mumbai on 12th Feb, 2019. The list of prestigious brands was judged and presented by BARC (Brand Advertising Research and Consulting), a global brand consultancy firm and ERTC Media, one of India’s leading independent media consulting & brand listing organisations. The recognition solidifies Aadhar as a leader within housing finance segment across various parameters such as brand recall, impact, trust, positioning, growth, reach, and innovation.
- Aadhar Housing Finance won the prestigious Finnoviti 2019 award at ‘Finnoviti Awards & Conference’ presented by Banking Frontiers and their Knowledge Partner Deloitte in Mumbai on 25th January, 2019 for innovative distribution and referral model named ‘Aadhar Mitra’.
- Aadhar Housing Finance bagged 2 prestigious awards at the ‘Banking, Financial Services & Insurance Awards’ presented by ABP News in Mumbai on 28th November, 2018:
- Housing Finance Company of the Year (Medium and Small) – for our exemplary work in the affordable housing finance segment.
- Marketing Campaign of the Year – for our recent brand campaign #GharBanegaTohDeshBanega.
- Aadhar MD & CEO awarded the ‘BFSI Leadership Award’ in Nov 2018 by ‘The Banking and Finance’ magazine and ‘elets’.
- Aadhar MD & CEO awarded the ‘Certificate of Excellence’ under “30 most innovative Business Leaders to watch in 2018” in July 2018 by ‘The CEO Magazine’.
- Aadhar receives the Award as the “Best Affordable Home Loan Provider of the Year 2017” at the ‘Outlook Money Awards’ March 2018.
- Aadhar CEO receives the ‘Inclusive Business Leaders Award’ from International Finance Corporation (IFC) for Aadhar’s exemplary work in Inclusive Business at the 2012 Inclusive Business Leaders Forum in Tokyo, Japan.