You can options for various
combinations including loans that combine the benefits of fixed and floating
rate versions.
During the initial years of the
new millennium, when interest rates were declining steadily, a substantial
portion of fixed loan customers switched over to the floating rate option. The
same people hastily backtracked when the rates stabilized after a few years and
actually registered a marginal increase. At present, nobody can simply gaze
into a crystal ball and predict interest rate movements for the next 15 years
or so. Thankfully home loan providers have come up with a product that is ideal
for this situation combination home loans!
Commonly available
This concept begins with the
teaser offers, where the rate of interest is kept fixed at a predetermined rate
for the initial two to three years. After that, the floating rate format and
calculations take over.
Hunt for this
Another option, again offered
by just a few lenders, is also referred to as a ‘split’ loan. If the applicant
needs a loan of say fifty lakh, he has the option of taking half the amount
(Rs. 25 lakh) as a fixed rate loan and the other half (Rs. 25 lakh) as a
floating rate loan. This way, he is assured of some degree of stability and at
the same time, would also benefit to some extent as and when the home loan
rates decline as they have a right now.
How it works
A combination loan is ideal for
those who want to minimize their interest rate risk as this loan hedges it to a
large extent. Also, the borrower benefits both ways; when interest rates fall
as the floating rate reduces with it and if the rates go up the fixed rate part
of the loan provides the hedge throughout the term of the loan. And it doesn’t
always have to be a fifty-fifty ratio. You can option for a 70% fixed and 30%
floating or 60% fixed and 40% floating loan also, depending on your risk
appetite.
Facilitate the process
While the procedure for getting
a home loan is much quicker and easier these days, there are several ways of
facilitating it even further. For instance, if you are entering into a second
sale or resale transaction, just think logically for a moment. Obviously, some
of the existing residents will have taken home loans and the lending
institution in each case will have already done the basic groundwork in terms
of the project verification, municipal clearances, plans, and so on. In such a
situation, your application would definitely be processed much faster by one of
those institutions as compared to a new institution starting the entire process
from scratch.
Documentation matters
It is also advisable to get a
list of all the documents that were required by the lending institution, so
that you can start collecting them for your application.
Top tips
- Builder list the institutions that have pre-approved specific projects.
- This enables faster clearance of loans as the project details are already verified.
