21 October 2010
Meaning of Interest Rates in Home Loans
Interest rates are a very common term we usually use during conversations regarding home loans. The media and advertisements highlight various real estate prices and unique opportunities for taking home loans. The most common point of luring from the lenders is that loans are available at low interest rates. Most of the advertisers use this as the best selling point of their property and houses.
Let us understand what interest rates are and how do we judge whether they are low or high. Interest rate is a percentage of money on the principle amount of loan that is taken by the borrower. Each financial institution varies in deciding the interest rates. Government banks offer lowest interest rates but their loan approval procedure requires more time. Private home loan financial lenders and institutions have easy availability of loans but they may have higher interest rates and smaller tenure for repayment. Interest rate is not the only criteria for selection of home loan. One must go thoroughly considering all the other factors before selecting the right home loan.
Rates of interest vary from institution to institution, from place to place, from region to region and also from time to time. Due to inflation and changes in economy the rates of interest decided during certain time may vary after few months. One must negotiate according to the rate of interest calculated on the day of the deal and finalize it or lock it so that other changes do not affect the calculated EMI. If the individual can afford it is best to pay a higher down payment and take loan for the rest. Thus it will be a smaller amount for lesser tenure of repayment.
However much lower the interest rate of the home loan it is always understood that we have to pay a much larger amount than the principle amount hence going for a home loan must be thought about seriously and carefully to avoid undue stress and pressures in the family. The market survey gives offers from different financial institutions regarding their interest rates. Government banks also offer loans and their rates are low. One can compare different interest rates and go in fro the best offer from a reputed financial institution.