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Everything You Should Know About Fixed Rate of Interest on Home Loan

Updated on July 15, 2024 , 1871 views

Dharmesh is a 25-year-old man with a stable job. He moved to Mumbai in order to look for a job and settle down with his family. After completing two years at his workplace, Dharmesh decided to buy a house so that he can ask his parents to move in with him. With excitement, he started scrolling through various apartment listings online and came across a beautiful and cosy home in Mumbai. He knew then and there- this was the house he was looking for.

Fixed Rate of Interest on Home Loan

Soon, he set up an appointment with an agent who took him for a tour through the house. Dharmesh was in love with light-coloured walls, daintily painted inner spaces and the wide and open kitchen space. He knew his family would fall in love with the home.

However, Dharmesh did not have enough cash to buy the house and decided to apply for a Home Loan. While researching for the best home loans online, he came across something he didn’t know much about- The fixed rate of interest.

What is Fixed Rate of Interest?

Fixed-rate of interest is exactly as it sounds- it’s a fixed rate. This means that the rate of interest will remain unchanged on the loan you have opted for. This rate of interest remains fixed for the tenure of the loan or at least a part of the tenure. The details will be made clear during the time of the loan application.

In case you are buying a home, the loan repayment tenure is usually 30 years. The rate of interest will remain constant throughout. However, this is only advantageous when the Market conditions are trending downward.

Fixed-rate of interest is an attractive option for borrowers who don’t want to take the risk of changing interest rates. Borrowers usually take up this option when the rate of interest is low.

For instance, if Dharmesh opts for a home loan with a fixed rate of interest when the interest rate in the market is pointing downward, he will be making a profitable investment. The rate of interest will remain constant for him for the loan repayment tenure he chooses. This will not change even if there is Inflation.

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Benefits of Fixed Rate of Interest

1. Certainty

The major advantage of a fixed rate of interest is the Factor of certainty. The rate of interest remains unchanged for the loan period. This will help you plan your self financially and maintain the standard of living.

2. Low-Interest Rates

Borrowing loan during times of low-interest rates can be extremely beneficial since the rate will remain constant throughout your loan period though it may undergo changes in the period. You could save money with the loan repayment and the interest rate.

3. Repayment Tenure

Fixed Interest Rate is beneficial even with longer loan repayment tenures. Even if changes occur in the real-time rate of interest, you will not have to worry for the fixed loan period. The rate of interest for you will remain unchanged no matter what happens.

4. Maintaining Budget

With fixed interest rates you can manage your monthly EMI and other financial budget very well.

5. Financial Security

Since fixed-rate of interest offers financial security. This means that you don’t have to worry about losing more money even if market rates rise.

Fixed Interest Rate Home Loans in India 2024

Two major banks in India offer home loans with fixed interest rates. They are HDFC Bank and Axis Bank.

Note: HDFC bank offers an interest rate based on the quantum of the loan. This interest rate is subject to a fixed period of two years. The interest rate will change thereafter.

Bank Rate of Interest
HDFC Bank 7.40% p.a- 8.20% p.a
Axis Bank 12% p.a.

Save for a Home the SIP Way!

If you don’t wish to opt for a home loan, you can still save money and buy the house of your dreams with the Systematic Investment plan (SIP). SIP gives you the freedom to save money regularly with ease. You can plan your budget and savings with SIP and also expect great returns. Save monthly and buy your dream home with SIP today!

FundNAVNet Assets (Cr)Min SIP Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2023 (%)
SBI PSU Fund Growth ₹34.7633
↓ -0.09
₹3,071 500 1737.499.941.727.154
Invesco India PSU Equity Fund Growth ₹70.6
↓ -0.32
₹1,138 500 23.243.597.741.331.954.5
ICICI Prudential Infrastructure Fund Growth ₹194.88
↑ 0.07
₹5,034 100 15.629.568.439.630.544.6
Nippon India Power and Infra Fund Growth ₹378.81
↑ 0.40
₹5,697 100 20.434.881.439.130.858
Motilal Oswal Midcap 30 Fund  Growth ₹98.1908
↓ -0.12
₹9,819 500 22.732.365.838.732.541.7
HDFC Infrastructure Fund Growth ₹49.504
↑ 0.06
₹2,055 300 16.728.674.337.524.655.4
DSP BlackRock India T.I.G.E.R Fund Growth ₹341.686
↓ -0.12
₹4,386 500 22.938.379.137.329.949
Kotak Infrastructure & Economic Reform Fund Growth ₹71.741
↑ 0.04
₹1,990 1,000 2136.863.335.728.737.3
IDFC Infrastructure Fund Growth ₹56.56
↓ -0.07
₹1,171 100 25.545.588.735.430.650.3
Franklin Build India Fund Growth ₹146.261
↓ -0.48
₹2,530 500 17.930.576.435.228.151.1
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 16 Jul 24

Funds mentioned are considering best CAGR returns for over 3 years and fund having atleast have market history (Fund age) of 3 year and have minimum 500 Crore of asset under management.

Conclusion

When applying for a loan, make sure to read all the terms and conditions carefully.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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