At the time of availing Home Loan, the biggest dilemma is to select Floating vs Fixed Interest Rate. Any wrong decision can put big hole in your pocket. Normally, risk averse customers opt for Fixed Interest Rate. If you decide to switch loan from Floating to Fixed during loan tenure then you might need to shell out charges upto 1% of outstanding loan amount. Let’s find out pros and cons of both to solve this riddle of Floating vs Fixed Interest Rate Home Loan
Floating Interest Rate Home Loan
Between Floating vs Fixed Interest Rate, In Floating Home Loan interest rate is linked to Base Rate (Banks) or BPLR / RPLR (Housing Finance Companies). To know more on Base Rate & BPLR, you may CLICK HERE. The interest rate movement is linked to current economic conditions in country predominantly inflation and growth factor. High Inflation means High Interest Rates thus Low Growth Rate. Inverse of this is also true. The Floating Interest Rate is dependent on RBI policies & cost of fund i.e. at what cost Bank / HFC is acquiring funds for lending. We will understand more on how interest rates are fixed in next article. The Floating Interest Rate equals to Base Rate plus Mark up or BPLR / RPLR minus spread/discount.
Pros:
(a) Financially most beneficial during low inflation period
(b) Rate of Interest is lower by 1% to 1.5% compared to Fixed Interest Rate at the time of availing loan
(c) No Pre-Payment Penalty on Floating Home Loan
(d) Option to lower interest rate (Reducing Mark up or Increasing Discount) in future by paying conversion fees
Cons:
(a) Highly Volatile: Any change in Base rate will result in either higher EMI or increased loan tenure (EMI remains same).
(b) Non Transparent way of calculating Interest Rate
(c) Very high Interest Rate variance of upto 1.5% between various lenders e.g. One lender is providing loan @ 10% & another is providing @ 11.5% whereas loan amount and other factors are same.
(d) Limited options to select lender of choice providing lowest interest rate
Fixed Interest Rate Home Loan
Between Floating vs Fixed Interest Rate, In Fixed Home Loan Interest Rate is fixed for the loan duration. There will be no change in Interest Rate during loan tenure though there is a rider which we will discuss. Your Home Loan will be immune to current economic conditions and you will be paying fixed amount every month as EMI.
Pros:
(a) Financially most beneficial during high inflation period
(b) Financial Certainty due to stable EMI amount and Loan Tenure. Interest Rate is hedged against any upward movement.
(c) You may select lender of your choice due to least variance in Interest Rates
(d) Suitable for risk averse customers
Cons:
(a) The biggest disadvantage is that Fixed Interest Rate is actually not fixed. Interest Rate Reset clause in Loan Agreement provide option to lender to revise Interest rate every 3 years or 5 years therefore interest rate is not fixed in true sense.
(b) Pre-Payment / Pre-Closure penalty on Fixed Home Loan. Reason being fixed interest rate is not linked to market rates. Bank’s borrowing cost for Fixed Interest Rate Home Loans is high because of future commitment from customer.
(c) In case interest rates go southwards then customers don’t have any option to lower interest rates even by paying conversion fees.
(d) Interest Rates are higher compared to Floating Interest Rate
In this debate of floating vs fixed interest rate, we have gone through pros & cons of both options. The winner of floating vs fixed interest rate discussion is Floating Interest Rate. Reason being comparatively lower interest rate, flexibility of reducing interest rate and waiver of pre-payment penalty. Most of the home loans in india are pre-closed within 8 years therefore if you opt for fixed interest home loan then for sure you will be paying penalty. Moreover in floating vs fixed interest rate options, you can reduce interest rates only in floating interest rate home loan and at the time of availing Home Loan Interest Rate is lower. 90% loans sanctioned in India are Floating Interest Rate Home Loans. As i mentioned that if you are risk averse then between Floating vs Fixed Interest Rate, the best option for you is Fixed Interest Rate.
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Dear Nitin,
My friend booked an appartment for a total cost of 35 lakhs ( excluding registration and interiors) in April 2012 and I have booked one in 2013 April for 44 Lakhs ( excluding registration and interiors) ( same size) The possession for both was on October 2013. He started the emi ( it was full emi from the begining) from May 2012 and myself started in August 2013. being paid almost 9 lakhs more for the same size appartment in the same community, am I at loss compared to his price? Could you please give a reply.
The price of a flat also depend on direction of entrance (NE facing command premium), pool/garden facing, floor rising (higher the floor, higher the price), No. of car park(covered/open) etc
Even after considering all the factors, you paid approx 23% extra within 1 year, In my opinion is too high premium. I don’t think so that in any area property price increased so much. At the end of the day, it also depend on how much u negotiate. Builder always want to sell at high price and seller always want to buy at lowest price.
Thanks Nitin for the input. Actually the price got increased by October 2012 and when I was booked other developers were quoting Rs 3000/- per sqft for pre launch or 1.5 year duration projects in the same area.
Can you please write on SBI Maxgain account also? how much beneficial is this etc.
SBI Maxgain is one of its kind product & quite innovative. As per my knowledge only SBI & Standard Chartered Banks are providing such product. It is financially beneficial as you can park surplus funds in maxgain account and will not be paying home loan interest on equivalent amount. In other words if your ROI is 10.5% then you will be getting indirect return of 10.5% on surplus funds. Most important, you will have flexibility to withdraw those funds any time.
Thanks Nitin
Dear Mr. Nitin,
New Look of your website is superb, now we can see the posting date of article as well earlier it was missing.
I find your article coming quite often now a days, keep up the good work. Thanks
I Had availed a home loan from LIC HFL and its quite Ok with 2 Year locken in @10.25% for any upwards movement and then floating afterwords.
By The awy what is your Idea in investing in various schemes of diff City development authorities.
How reliable and transparent they are in terms of lottery system etc?
Your comments plz.
Regards,
Kamlesh Kumar
Sharjah UAE
Thanks for your kind words and am glad that you liked the new look of blog.
Any scheme by city development authority is very much reliable and safest bet. Though people doubt the transparency in lottery system but i can assure that situation is not that bad. The property under such schemes is normally @ 20%-25% compared to market rate and money is refunded for rest all. Being a government setup, you can expect delay in refund.
Dear Nitin,
Thanks for your wonderful insights on home loans. Assuming the ROI to be the same, is low base rates with high markups better than high base rates with low markups or vice-a- versa.?
Regards,
Naveen Raam
Irrespective of Base Rate, the loan mark up should be as lowest. In ideal scenario Mark up should be zero i.e. Bank is lending at Base Rate with zero mark up. Currently some banks are providing loans at base rate for some categories e.g. Canara Bank & Bank of Baroda. As per RBI guideline, Bank cannot lend below Base Rate.
Normally when Base Rate is low, Mark ups are high and vice-versa.
Dear Nitin,
I want to compare the Base Rate and the RPLR of the HDFC with the average base rate or repo rate published by the RBI, I want to understand the trend whether HDFC alter the RPLR when ever the Repo rate/ base rate is altered, Can you please help me on were the historical data of RPLR will be available
HDFC RPLR data you need to request from HDFC Ltd branch only. Just check following links, if its useful for you
https://www.sbi.co.in/user.htm?action=viewsection&lang=0&id=0,1,20,115,744,915
http://in.reuters.com/article/2013/08/30/india-plr-idINL4N0GV2O320130830
Dear Nitin,
I am planning to go for a home extension loan, My current home loan is with DHFL, I have already availed home extension loan @13.5% from DHFL and foreclosed it recently, Since I am not happy with the DHFL I don’t want to avail the home extension loan again from DHFL. Please advise whether other banks can provide the home extension loan or to go for personal loan.
For Home extension loan your Home loan should be with same Bank/HFC. It is not possible to avail Home Extension Loan from Bank/HFC A whereas Home Loan is with Bank/HFC B.
You may go for personal loan but it may impact your CIBIL score as personal loan is unsecured loan.
Thanks very much for such information I have PPF account in Post office need to transfer in SBI so what to do ?
Thanks for liking the post. To transfer your PPF account from Post Office to SBI. Pls follow following steps
1. Open Savings account in SBI and avail internet banking facility
2. Get your PPF account passbook updated from Post Office
3. Download & fill following SB 10 form from following link
http://www.indiapost.gov.in/pdfForms/SB10-b-ApplnforTfrofAccnt.pdf
4. Along with SB 10 form, write an application to Post office to transfer your PPF account to SBI. In application mention your Savings account details of SBI (attach photocopy of SBI passbook page which has your SBI savings account details)
5. Attach photocopy of PAN & Address Proof
6. Get your application verified from post master of post office where you have PPF account. Post verification, he will issue you a note regarding closure of your PPF account.
7. Cheque or DD will be issued in the name of SBI
8. Now you can open PPF account in SBI and amount will be credited to your SBI PPF account.
9. SBI will notify you, once the process is complete and will issue PPF passbook.
Take photocopy of all documents submitted including post office PPF account passbook before submitting to SBI.
Thanks a lot I have already SBI saving Account with internet banking. I will do on this way.
Hi Nitin,
I have shortlisted Axis Bank and HDFC Ltd for my Home Loan at Floating interest Rate I require your help to choose the best one out of it
Axis Bank is Providing me a Home Loan at Base Rate + 0% spread i.e at 10.25% and HDFC at RPLR – 6.5% i.e (16.75-6.5%) at 10.25% Interest Rate charged are same by both
What is think is Banks cannot charge below the base rate. If in future if the interest rates are reduced and axis bank want to be competition it will reduce the Base rate so i would always be on Base Rate with axis Bank and they will not be any other loan available with Axis Bank below this Rate for me to switch so i would be on the lowest rate with in the Bank and need not require to switch on the lowest rate
However in case of HDFC Ltd They are charging below the RPLR and if in future if the interest rate come down in the market and to be in competition HDFC may provide lower interest Rate to its New Customer by increasing the Spread and without altering the RPLR in those cases if I want to switch i need to pay the charges and if i dont switch i would be on the higher interest Rate
And if the Interest Goes up in the Market in case of AXIS i am still at the Base Rate and in Case of HDFC it is possible for them to increase the RPLR
I am considering other Factor as Same in both the Organisation i.e HDFC and AXIS such as Services, Charges etc
Please advice me am i right on the above . and which would be advisable AXIS or HDFC on basis of above parameters
Dinesh
Am quite glad that you have done complete research…I don’t have anything to add :).
As you have indirectly answered your query and my opinion is also same. Axis Bank is right option for you.
Hi Nitin,
I am posting this question on this thread since i didn;t find any appropriate thread to post
My Question is my home loan was just approved a week back by AXIS Bank and now i have one prospect opportunity of a Job abroad and if i get through i need to join them in another 20 days
while i am havind a home loan with axis bank can i take up a job abroad and if yes is there any procedure to be done by me
Dinesh
Normally in this scenario, Bank will ask you to fully pay and close your Home Loan before leaving India for Employment purpose. Also you need to immediately inform bank about the change in your employment status. In few scenarios, bank might allow the Home Loan Borrower to leave India under certain conditions. You need to discuss with bank.
You may check your Home Loan Agreement, definitely there will be clause in Home Loan Agreement regarding same.
Hi Nithin,
I have got home loan eligibility from axis – 10.25% fixed for 2 years, hdfc – 10.25% fixed for 2 years, lic – 10.10% fixed for two years & no answer for interest after two years, tata capital – 10.25% floating, in tata capital he says if i book apartment in wife name then it is 10.15% even if my wife is not working? just want to know is it good option. what do you suggest me?
I don’t recommend teaser schemes with Fixed Interest Rate initially and than shift to floating rate of interest. You may consider Floating Interest Rate Home Loan.
Thank you for reply
Axis bank offers at 10.25% for two years and after that base rate+0% mark up will it be a good deal, but he is insisting to take property insurance will it be useful what is the exact usage of property insurance
Its a good deal..You may go ahead
Its not Property Insurance but Home Loan Protection Plan which is basically a costliest form of Term Insurance. I will not suggest Home Loan Protection Plan. Please check my following post
https://www.nitinbhatia.in/home-loan/7-reasons-why-you-should-not-buy-home-loan-protection-plan/
I suggest you to buy online term insurance on your own which will be cheaper and more beneficial.
Hi Nitin,
But Axis bank insisting that it is mandatory to take HLPP is there any clause in their website or some where to show them it is not mandatory.
Also my age is 30 and loan amount is 21 lacks tenure is 20 years normally what will be the premium for term insurance if i buy it outside.
You may ask the bank to provide in writing that HLPP is compulsory with Home Loan. Please check following article
http://www.business-standard.com/article/pf/you-can-say-no-to-term-plan-bundled-with-home-loan-114040700036_1.html
You tell bank that you will complain to IRDA or approach Consumer court if this policy is forced on you. You also have option to return the policy during Free-Look period of 15 days from date of receipt of policy.
Premium of 21 lac term insurance for 20 years will be around Rs 3900 per annum.
hi nithin
I availed a home loan on floating rate from axis bank in 2008 and have been paying installments since then, but the principal amount has not reduced considerably and in turn number of installments have gone up from 180 – 220 months. Should i consider swapping to fixed rate at this juncture?
1. Give request to axis bank to link your Home Loan to Base Rate
2. After loan is linked to Base Rate, you may pay conversion fees and reduce your Interest Rate by decreasing spread over Base Rate.
To decrease Home Loan Interest Rate, i will not suggest to swap with fixed rate. You can follow above mentioned 2 steps to reduce Home Loan Interest Rate.
I am planning to take a home loan from ICICI Bank 10.25 fixed for 10 years. Is it a wise decision or you suggest floating rate at 10.15. Loan period would be 12-15 years.If i plan pre-closure then 2% will be charged. Please suggest.
I will suggest Floating rate at 10.15%. Please check my following post for more details
https://www.nitinbhatia.in/home-loan/fixed-interest-home-loan/
Hi Nitin,
I took a Home Loan for 28 Lacs from LICHFL at 10.4 % floating rate. However the interest rate shot up just after 6 months to 11.9%. The present interest rate is 12%. LICHFL says that there is no option to change my interest rate. So, decided to switch the loan to another lender at a lower interest rate.
The only option that I have is HDFC where we have 3 options – 10.10% floating, 10.15% fixed for 3 years and 10.25% fixed for 10 years. Which one do you suggest?
The reason SBI and other do not accept the take over is because the builder did not give us an OC which is required by these banks.
Please advise.
10.10% floating
hi Nitin,
I took a home loan from LICHFL for 22 lacs at 10.95% (fixed for ten years) during March 2013 for 20 years tenure. I feel that the interest rate is too high comparatively than other banks.
When I was approached to LICHFL for take over the loan to SBI, they charged 2% pre-closure charges. Kindly advice me,
(1) Is it useful to take over the loan to SBI with this 2% charges. (In SBI 9.95% floating).
(2) Is it required to pay pre-closure charges to LICHFL? What is the RBI norms?
(3) Can I change from fixed rate to floating rate of interest in LICHFL itself? Any charges for this switch over?
(4) What is the current floating rate of interest in LICHFL?
Please advise.
I suggest you to wait till your Home Loan shift from fixed interest to floating interest. On floating interest there is no prepayment penalty. As it is fixed for 10 years therefore you can shift by paying 2% prepayment penalty only if the difference in ROI is atleast 2 % i.e. your new home loan should be at approx 9% interest rate.
sorry, i cant understand. If I take over the loan to SBI, and if the ROI is 9% only at SBI, then it is benefited. Otherwise continue as it is. Am I right? Kindly clarify.
Any lender who is willing to provide 9% ROI is beneficial for you else you can continue.
thank you Mr. Nitin for your timely reply. my confusion comes to an end, thank you very much.
Hi Nitin sir,
I borrowed the house loan from the LICHFL @10.70% for three year fixed rates at 14.40% PLR now its come to floating rate interest 11.75% at 14.50 % PLR ,how the rate of interest rate increase inspite of other bank and institution decrease the rates.
LICHFL don’t disclose spread / discount over LHPLR at the time of loan disbursement. Now they offered you spread of 2.75% therefore your interest rate is 14.50% – 2.75% = 11.75%.
Hi Nitin Sir,
May i know LIC current floating rate of interest today .
Currently LICHFL is not providing Home Loans on floating interest rate. Interest rate is fixed for 1st 2 years and then shifts to floating interest rate.
Hi Nitin Sir ji,
I borrowed the House loan from LICHFL@10.25% for 2 years fixed ,after that it will be Floating.Now 2 years over .Now LICHFL charging 12% interest .My outstanding amount is 2100000 .So could please suggest me switching over to other Bank is profitable ? if so which Bank is better.
You may transfer your Home Loan to SBI or ICICI Bank.
Hi Nitin,
i am having a home loan with LICHFL and after 2 years they are now charging 12% ROI.please suggest which bank i should switch to..
ICICI– 9.85%( 9.75% base rate + .10 Mark UP)
Axis Bank– 9.95%(Base Rate)
ICICI bank
Hello Nitin,
I am in approved by LIC for home loan, but now i am confused for which type of loan shall i go for Fixed (9.9% for 2yrs) or Floating (10.25%).
Please suggest considering future prospect and change from LIC to SBI.
Floating
Hi ,
I have read almost all articles and it was great info for me. I think I was little late to read your articles. But even now I have understood a lot.
I am also on same scenario like took a home loan 17 lakh from LIC HFL with 10.25% two years back and now it is in 12%. From the post I could understand better to transfer the loan to SBI or ICICI.
I am planning to repay some amount now and then slowly trying to transfer to SBI(quite difficult with documentation).. What is your advice with this ? Is it better first transfer the loan then repay OR vice versa?
Also even in SBI also why floating is best now ?
Better to prepay immediately and then transfer.
Hello Nitin,
Thanks for the article, your time and your effort.
I currently have a 3yrs Fixed and rest Floating Housing Loan with LICHFL. They were charging 10.7% till last month and now they are charging 11.75% floating. I’m looking to transfer the loan and here are my queries:
1. LIC person informed me that even though my Loan is in Floating there will be a 2% charge as pre-closure since it is Balance transfer and not funds from my own Pocket.
2. I’m looking for another property and have processed a Loan with HDFC at 9.85% and they will offer the same ROI for this, so will this be ok or shall I look for another bank.
Currently I wish to go for Floating.
Thanks in advance
Ganesh
1. It is not true until unless your Home Loan is under some special scheme. You need to check your Home Loan Agreement.
2. You may opt for SBI or ICICI Bank.
Hello sir.
I am having home loan in Lic Hfl 16lakh rupees two years Back fixed 10.25% nw it is in 12% then I asked to lic hfl staff they suggested to pay 8000 rupees to reduce 4%on current rate. My loan Period is 20 years it is applicable for that period. Is it true?
I suggest to transfer to SBI or ICICI Bank.
Sir, i have home loan in Lic Hfl,for 16lakh,for the period of 20 years.now I think that takes insurance for home loan, which is the best.
I don’t suggest HLPP.
I took home loan of 18.5L from LIC HFL as 5years fixed and then floating ,paying EMI for 4 years at the interest rate of 11.15 , current OS is around 13.5L , Please suggest a good option for me to reduce it.
After your home loan shift from fixed to floating interest rate, you may transfer your Home Loan to SBI or ICICI Bank.
Hi Sir,
I took a home loan from LICHFL for 20L for 20 years. I have opted for 3 years fixed and then floating. Initially 17L was disbursed and the remaining 3 L was disbursed to the builder only after 2 years. But we were paying the same EMI right from the first month. Did LICHFL charge interest even for the 3L which was not disbursed? Even after 3 years the EMI is not reduced? Please suggest how to take it forward.
You may check your amortization schedule to check the same.
Hello Sir, I have 30 lakhs loan from LIC since from 2011 sept and did wrong decision to make it fixed for 5 years. Now I am in process to take over loan to SBI, but in the LICHFL quotation they have added pre-closure charges. Do we have any option to make it again Floating from Fixed then apply for transfer?
We have one more year to complete Fixed term, please suggest. I actually calculated my current LIC 11.65 fixed interest rate with SBI 9.5 rate and 3000+ difference is overcharging by LIC in every month EMI, so would it prefer to wait till next one year to complete Fixed term, or do transfer as early as possible?
As i understand you will save 36000 in one year on interest payout. Now you compare it with pre-closure charges. If pre-closure charges are less than 36000 then you can shift else wait for one more year to complete fixed interest period.
Hi, thanks for the reply. Can you please confirm do we have an option to change now from Fixed to Floating rate of interest before 5 year term completion in LICHFL?
It is not feasible.
Hello Nitin Sir, I took a home loan of Rs 25lac from LIC HFL in 2011 with a fixed rate of 9.15% for 5 years., I took this loan for 20 years. Now fifth year of this loan would be completed in march 2016. What would advice on this please? Should I keep it here or transfer my loan to some other bank? and should I get it converted to floating or remain it as fixed rate?
It will be automatically converted to floating interest. You may check what will be interest rate after this shift then we will decide the next step.
amsha hi sir
i took a home loan from HDFC for 20L FOR 20 years . i have opted for 10 years fixed and then 10 years floating . but we were paying the interest is 11.5% now floating is 9.5% nearly 30,000/- difference in p.a so would it prefer to wait till 10 years to complete fixes term or do transfer as early as possible floating or shift to sbh
You have not mentioned when you availed home loan.
hello sir, I’m planning to take a home loan and have seen an offer from ICICI that provides a 10 years fixed interest rate @9.50%. My question is, as per the prevailing economic condition, is it advisable to lock in the loan for 10 years at the provided interest rate? Is the interest rate going to come down or go up? Please guide which option is better a floating or fixed? Thanks for your guidance.
All fixed interest home loans come with reset clause. In my opinion, floating interest rate is better.
dear sir. my inhand salary is 55000 per month from CIL. i want to take home loan from SBI. i want to know from you that which loan interest rate will be best for me floating or Fixed home loan from SBI bank. what is rate in both case at this time.
Floating interest rate at 9.55%
Hi Nitin Sir,
I took a Home loan of Rs.25Lakhs on October 2014 from LIC.Its fixed for 2 Years at 10.10% and will be converting to floating on Oct 2016.As per the LIC Manager she told that the floating interest rate during conversion may be around 10.20%(after the discount on rerating by paying Rs.1140).
I have 3 options now
1)Continue using LIC with the floating rate during that time.
2)Once the conversion is happened ,shift the Loan to SBI/HDFC with floating interest.
3)Pay some Pre-Payment of 4 Lakhs before the conversion and once the conversion is happened shift the Loan to SBI/HDFC with floating interest.
Please suggest the best option.
In my opinion, it is too early to take a call. Therefore i suggest you to revisit in Oct’16 till that time continue with LICHFL. Interest rates will change in April’16 after MCLR is implemented. If there is major change of 1.5% to 2% from current level then you may reconsider your decision else wait till Oct’16.
Hi Nitin Sir,
Thanks for your response..
I will wait till Oct’16..
But is it a good idea to pay some Pre-Payment of 4 Lakhs before October(During Fixed Period).
You have to pay 2% penalty on prepayment. I suggest you to save this money and prepay in Oct’16 after loan shift from fixed to floating.
Hi Nitin
When its from own source, LICHFL doesnt charge for prepayment.. I have paid it already few times in my fixed rate tenure.. Am i missing something?
The penalty might be adjusted in your loan amount. Check amortization schedule. If it is not charged then enjoy :)
Hello Nitin Sir,
I have availed Home loan from LICHFL by Oct 2010 for 5yrs fixed rate of 9.25% and it ended by Oct 2015. Now i see that the ROI is 11.75% as per the details online.
1) Whats your suggestion for proceeding with LICHFL or any other banking institution?
2) Switching over to another bank with a prepayment is beneficial??
Please provide your comments
1. You may transfer your home loan
2. There is no prepayment penalty as your home loan is now floating interest rate.
Hi Nitin Sir,
I took a Home loan of Rs.20 Lakhs in December 2013 from LIC.Its fixed for 2 Years at 10.10% and will be converting to floating from Jan 2016.
As maximum no of banks have reduced their interest rate upto 9.5% few months back but still I haven’t get any type of rebate in terms of rate of interest from LIC HFL
so I requested you to kindly suggest me on same.
Regards
avnish
You may opt for balance transfer to SBI or ICICI Bank.
Hi Sir,
I took a Home loan from HDFC in 2015 at true fixed interest rate of 10.25% for 10 years. After 10 years my loan account will be converted to floating. But now interest rates are drastically coming down and now SBI is offering at 9.35%. Recently RBI Governor made a statement that again they are going to cut down interest rate. I’m little worried about my EMI. I am planning to switching to SBI. Could you please help me what is right in current economic conditions. If at all i want to switch my loan how much extra amount (pre-closure) i need to pay to HDFC and processing charges in SBI. Finally will i be benefited in coming years?
It require detailed calculation. HDFC will charge 2% penalty for foreclosure as the home loan is fixed interest home loan.
Hai Sir,
Have taken housing loan from LICHFL to the tune of Rs.23 lakhs and after 16 months, decided to switch over to other bank and hence, have approached LICHFL with balance outstanding amount amount of Rs.22 lakhs but they have receipted the amount on their suspense account and demanded for the closure charges since my loan is within fixed terms. My question is that whether the LIC will pay interest to us for that amount till we pay the loan closure charges? because of they are received our money and keeping it under their suspense account?
There is NO interest payable.
Hi Sir,
Many thanks for such a valuable post!
It has definitely helped in understanding fixed vs variable interest rates on home loans.
I am planning to take home loan for around 50-55 lakhs for a resale property for period of 20 years. I would like to ask you that depending upon the current economic scenario, shall I go for fixed interest rate or floating or a combination of both. Also as this is a resale property would the loan amount provided by the bank cover for the circle rate charges applicable?
You may opt for floating interest home loan. I could not understand the second part of query related to circle rate.
I applied for home loan(21.5l) to pnb housing finance Ltd . I select 5 years fixed and then floating.The reason to select 5 years fixed roi is the security.I think to pre-close my loan in 7-8 years.Is my decision correct or I will go 3 years fixed and then floating.Please advice.
In my opinion, floating interest rate will be better option compared to fixed+floating.
Hi Sir,
my home loan with LICHFL, just 4 months back i reduced it’s interest rate from 10.7 to 10.2 by paying fee, but if i compare with currect interest rates i am at higher interest rate so thinking to transfer it to ICICI , they have 2 plans 1) 9.45% floating & 2)9.45% fixed for 10 years, could you please suggest me to choose best plan as 9.45% fixed is somewhat tempting me and i am planning to take loan for 13 years tenure so first 10 years would be fixed after that it would be floating, but not sure whether it would be the right decision or not, my current outstanding is 30 Lacs.
In case if my decision is not correct could you please help me to understand it why.
Thank you,
Regards,
Santhosh.
I will prefer floating as interest rates are expected to drop further.
Hello Sir,
I took a Home loan of 25L from HDFC in October 2015 at an interest rate of 9.55% for 30 years.
My Loan type is:RESIDENT HOME LOAN-VARIABLE RATE-MONTHLY REST. When can i expect the ROI revision?
You interest rate will increase or decrease with change in RPLR of HDFC Ltd. Alternatively, you can pay conversion fees to reduce your home loan interest rate.
Hello sir,
I took home loan of Rs 32L from LICHFL. They informed me fixed rate of interest 10.10% for initial two years.Loan was disbursed in Feb 2015,now the fixed tenure is completing in Feb 2017.Kindly guide whether it will directly convert into floating rate or i need to follow with my LICHFL Branch.
Also suggest if i transfer loan from LICHFL to any private bank which is offering lower rate of interest weather i will be benifited or not.
It will be automatically converted to floating interest home loan. You may check what will be interest rate post conversion.
If the revised home loan interest rate is not closer to existing home loan interest rates i.e. 9.15% then you may transfer the same to SBI or ICICI Bank.
Dear Sir, I’m going to take up 25L home Loan for 8 years tenure with ICICI (EMI: 37K/month approx.) shortly in a week’s time. Current ICICI home loan interest rate as on today 21-Nov-2016 is
FIXED(3 yrs/5yrs/Full tenor)= 9.2%; FLOATING = 9.15%. I came to know that currently Home Loan interest rate trend is in downward side and with the effect of huge inflow of cash deposits into the banks due to demonitization. I’m not sure how long and upto what least interest rate trend will go downward. Also not sure when the interest rate gets reverse and goes beyond 9.2%.
I’m thinking to go for FIXED for 5 years tenure at 9.2% and remaining 3 years for floating. But i came to know there’re pre-payment charges about 2% of outstanding loan + Taxes.
Can you please suggest whether do i need to go for only Floating or Fixed(how much tenure) or both for how much tenure? Please suggest tenure details as well.
When will the interest trend gets reverse? Currently currency also fluctuating at around Rs.68/$.
Good to know that you did lot of study before availing home loan. In current scenario, i will prefer floating interest home loan. The interest rates are expected to fall sharply in next few years.
in floating rate of int. .is it not the responsibility or duty of lichfl to reduce the r.o.i. automatically.Can we case a file against them in consumer court
No. A customer cannot force HFC. The decision rests with HFC depending on the cost of funds.
Hi
I purchased a home with fix interest rate last year with SBI. I would like to change it to floating , is it possible and what are extra cost I need to bare.
It depends on terms and conditions mentioned in home loan agreement. Normally banks charge 2% of balance outstanding to convert home loan from fixed to floating interest home loan.
I had taken loan of Rs.2960000 for 20 years repayment period from LICHFL initial fixed interest of 8 and later to floating after 2 years. Current floating interest rate is 10.2%. Whether its good to continue or transfer the loan? If transfer the loan whether there will be any change in the number of years repayment/can the number of years of repayment can be reduced. If transfer which bank would be good? Whether there would be drastic change in the coming financial year demonetization effect? whether to wait till March’17? Pl. advise.
You may balance transfer to Bank of Baroda (If credit score is more than 760) or SBI. DeMo effect is still not clear on interest rates. Personally i think that interest rates will not drop below 8%.
i took a home loan from PNBHFL for 20L FOR 20 years in june2014 . i have opted for 10 years fixed and then 10 years floating . but we were paying the interest is 10.75% now floating is 9.5% nearly 30,000/- difference in p.a so would it prefer to wait till 10 years to complete fixes term or do transfer as early as possible floating or shift to sbi?
It require financial calculation. In case you balance transfer or shift from fixed to floating you need to shell out 2% prepayment penalty. If the savings in interest post switch offset the prepayment penalty then you may go ahead.
Hi, I plan to take a loan of 75 lacs+ for 20 year tenure. intent is to close the loan in about 8-10 years. the HFC is offering 8.5% floating and 8.55% fixed for 3 years (post which floating). While fixed of 8.55% looks attractive now and considering that interest rates may not go below 8%, do you advise to go with the fixed rate for 3 years or otherwise
Second query – is the amortization calculation different for fixed and floating rates ie; if opting for fixed rate then does the HFC take higher interest adjustment thereby making it less attractive as compared to the floating rate since 3 years is as such a very short term
Normally, in fixed interest home loan, the interest rate increase drastically post fixed interest period. Therefore, you need to check the floating interest rate applicable post 3 years assuming everything remains same.
Your 2nd query is not clear to me. Amortization calculation may change with interest rate but assuming interest rate is same then the calculation will remain same irrespective of interest rate type.
Hello Sir,
I have a loan of 2100000 taken on April 2016 with LIC HFL with 2 years fixed rate and floating after that.
My question is whether we can go for balance transfer the loan in Fixed rate period?
You can balance transfer but you will be charged a penalty of up to 2% on balance outstanding.
I have the same condition , my date of disbursement is 30th Aug,2015 and date of sanction is Jun,2015 , I am under fixed loan tenure with LICHFL for two years? So If i want to switch , shall I choose to do so after Sept,2017, Please suggest.
You can switch after completion of 2 years i.e. on or after 31st Aug, 2017.
Hello sir
I I plan to take a loan of 16 lacs from LIC HFL for 20 years. Just filled up the forms and submitted the documents . Agent is providing options (1) 8.70% floating linked with PLR full tenure
(2) 9.20% 5 Years fixed then floating (3) 9.50% sure fixed for 20 years
As i Cannot take a market risk and agent tells the floating may go rise to 11.50% some times.
which will be the best for me floating or fixed please suggest according to current market scenario
I will prefer floating interest home loan. The fixed interest rates are not truly fixed. There is a reset clause of normally 3 years to fine tune the interest rate.
Sir,
My father has taken a loan Rs. 6 Lakh from ICICI bank at 2005 at floating interest for 180 month tenure. Now, suddenly at the repayment certificate I watch that tenure has increase on 204 month. Now, my query is if tenure is increased then simultaneously EMI amount has also increased. So, how could bank increase tenure of 24 months without concern of us. Also, at 2011 as a special scheme of ICICI bank I have make fixed the percentage for 3 years against some charges lumpsum Rs. 3000/-. Now, it is quite embarrassing how tenure is increased 24 months more. Nobody are there in bank who can describe the calculation. IS IT RIGHT ?
You may ask for amortization schedule from the bank. It will help to understand the reason. Prima facie, it seems that your father availed home loan at lower interest rate and with the increase in interest (EMI remained the same) the home loan tenure increased.