Home Loan : Fixed / Floating?

POSTED BY Jay ON February 1, 2012 1:14 pm COMMENTS (7)

I’m looking for a home loan amount of 30Lac with tenure of 15yrs.

As of now, I have the following two options:

Axis 11.75% FIXED vs HDFC 10.75% FLOATING

Why Axis?
1. It has the cheapest interest in the market in the FIXED category?

2. We can do registration for the market value(20Lac) than the purchased value(38Lac). Hence we can save 1.5Lac during the registration time.

Kindly advise me whether I should go for fixed or floating?

With RBI cutting CRR, should I think that home loans might become cheaper in the near future and it dones n’t make sense to pay more amount form now itself!!

or

Should I see that 11.75 will be fixed for the tenure of 15years? Say, after 10 years even if the interest rates shoot up to 15%, I might be paying at 11.75% only.

Kindly clear the dilemma I’m in now.

Also, Please do let me know if there is a better option.

Thank you

7 replies on this article “Home Loan : Fixed / Floating?”

  1. Dear Hanuthean, In future, when ‘ll you sell this house say after 5Y or 10Y or 20Y?

    May I know?

    Thanks

    Ashal

  2. BFA says:

    Dear Hanuathean.
    Generally Home loans are provided with Fixed interest rate for not more than 3-5 years. Most of the banks would rather provide fixed rates for 2-3 years only.

    In the current economic environment, we expect that the interest rates would start getting reduced by mid 2012 – but the reduction should not be more than 1% this year and probably another 1 to 1.5% next year. It makes no sense to take Fixed Interest rate loan in a time when the interest rates are on down turn. These products are to be used when the expectation of interest to rise is more ! Banks in India generally don’t end up providing Fixed rate products unless they see that interest rates would be going down in the future.

    Hence to answer your question, the interest rate of your Home Loan would not be fixed for 10-15 years. It would be fixed for 2-5 years max. Better ask your bank and they shall tell you the duration of the fixed interest period.

    I also agree with Ashal – SBI’s Max Gain is one of the best available Home Loan product. It allows you to use your Home loan account as an overdraft. You can repay your Loan when ever you have surplus funds in your account. If you need those funds, you can again withdraw the funds from your home loan. Hence think that OD rate is currently at around 2-4% more than Home Loan rate. You can use SBI’s product to have the flexibility of an OD with the rates of Home Loan.

    Regards
    BFA

  3. Dear Hanuathean, Why you are registering your house @ 20L & not at 38L Rs.?

    Please clarify.

    Thanks

    Ashal

    1. Hanuathean says:

      Hi Ashal,

      It’s because I can save nearly 1.5Lac on the registration fee. And also I will be doing the registration as per the value quoted by the Govt Regn Dept .

      Do you see any issues if I do like that? Pls adivse.

      Thank you

  4. I personally believe that Interest Rates have touched their peek

    With RBI reducing the CRR, it is a clear indication that the RBI intends to loosen the Money Flow in the economy. Moreover, no economy can grow with such high interest rates.

    There is a high probablity that the Interest Rates are expected to decrease in the coming years

  5. Hanuathean says:

    Thanks Ashal for the reply.

    Usually banks give loan considering to what value we are registering the house, right?!

    for ex: if I am registering the house for 20Lac although I bought the house for 38Lac, the bank considers 20Lac and issues loan 80% on 20Lac.

    With Axis, I can register the house for 20Lac, but still they consider the loan for purchased value/technical value(which can be greater than 20Lac).

    Hope I’m clear.

  6. Dear Hanuathean, For home loan I w’d recommend SBI’s Max Gain home loan. Please search the forum for my prev. post on the same as well as contact the nearest SBI branch for more info on the same.

    By the way, I was unable to get your point of 38L value, 20L value, 30L loan?

    “ll you please clarify?

    Thanks

    Ashal

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