Rates of interest for housing finance
The rates of interest could be either fixed or floating, depending on the lending institution. The terms are self explanatory in nature and are very rarely interchangeable. Some lending institutions offer loan seekers a fixed rate of interest. This means the rate of interest remains unchanged for the entire duration or term chosen for re-payment of the loan. The fixed rate of interest does not allow the payment to be affected by interest drop in the market at any later stage.
On the other hand, the floating rate of interest is one that fluctuates according to the market lending rate, hence the term ‘floating’. The seeker of the loan amount bears the risk of paying more than budgeted for initially, just in case the lending rate goes up t any time. Both the rates of interest affect the Equated Monthly Installment or EMI in a major way and both have their benefits and drawbacks. .