Home Loans

 In case you have been planning to buy your dream home for very long and you are unable to do that because of the rising prices everywhere, here is some help for you. You can take a loan that will help you to buy your dream home. All you have to do is to save enough money to make the down payment of your home that is 20% of the home value. The remaining 80% of the home can be taken as a loan from a bank depending upon how much loan you are eligible for. The bank will decide how much loan you are eligible for depending upon your income and various other parameters. This home loan can be repaid to the bank every month as equated monthly installments or more popularly know as EMIover the entire tenure of the loan. A part of this EMI goes towards repaying the principal component of the loan and the other part goes towards paying the interest. The EMI is calculated on a reducing balance basis. A reducing balance home loan means that in the initial days of the loan, the interest component of the EMI is high as the loan amount is high. But gradually, when the principal amount starts becoming lesser and lesser as you keep on paying it through EMI, the interest component of the EMI goes down and the principal component increases.

Also, while you are going to take a home you need to decide, the type of interest rate you want to pay to the bank. The banks will offer you with an option of a fixed rate or a floating rate. A fixed interest rate for your home loan means that the interest rate is fixed for the entire tenure of the loan. But these days, most of these fixed interest rates come with a reset clause where the bank has an option to change the interest rate after a fixed period of time generally in a range of 3 to 5 years. There are also a few banks that give you a fixed interest rate for the entire term of the loan. 

The other type is the floating interest rate home loan where, the rates will depend on the base rate of the bank. As and when the bank will change their base rate, the interest rate will change for the customers. The change can either be in terms of EMI or tenure. For example, if the bank increases their base rate, the EMI will increase if the customer chooses the option to increase the EMI. Or in case the bank decides to decrease their base rate then the EMI will reduce for the customer. Generally the floating interest rates are cheaper compared to the fixed rates.

Looking at the interest rate scenario, this is quite an appropriate time to buy the home you were always looking to buy. The interest rates are on a rising trend thus in case you can manage to get a home loan right now, you can expect to get a better interest compared to what you will get a few months down the line.