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.