Tips to Handle Increasing Home Loan Interest Rates

Dev Singhraha

Relocation Expert

Recently home loan interest rates have been hiked by some of the leading banks. With the increase in the petrol prices, falling value of rupee, inflation there are chances of the further rise in interest rates as well in near future. It is a matter of worry for the borrowers. But how they can handle this increasing interest rate?

Here are some tips to follow.

Move to a fixed home loan rate: If you feel that the interest rates might get increased in future, then it is better to switch your floating rate of interest to a fixed rate of interest. The fixed rate of interest usually is a bit higher than the floating one and banks offer fixed-rate loans for up to 10 years. If your remaining tenure is below 10 years then you can easily opt for a fixed home loan rate and have a fixed EMI liability. While switching from floating interest rate to fixed one, you might not need to pay a penalty charge but if you switch to fixed to floating then the bank might charge a penalty.
Prepaying the home loan: According to the experts, it is always better to prepay the home loan early, to get rid of the home loan burden. Usually banks do not charge any penalty for the prepayment on the home loan. So if you have extra income or extra funds then you can start paying an extra EMI. This might help you in saving lot of money if the interest rate increases.
Quickly buy a home: Experts also says that it is not a good decision to delay home buying decision as it can be counter-productive on your personal finance. As the inflation plays it game, the value of money keeps on decreasing. Hence, if you keep on delaying your home buying decision then you might end up paying more to buy a property. Interest rare fluctuation is a continuous process and in the long run the highs and lows of the interest rates are averaged out, so the borrowing cost might not change substantially.

Therefore, the borrowers should keep a watch on the market and need to be aware of the situations like the hike in interest rate. These are just a few ways to tackle hike in interest rates but the borrowers should start getting prepared from a very early stage.

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