Mortgage Loan Types and Interest Rates

You never know when you may encounter the sudden need of money while you are feeling the pinch. It’s not possible seeking help from friends and family all the time when you are in dire need of money. This is where mortgage loans come into play. Mortgage loans are loans against property. These are secured loans, hence considered a reliable source for taking financial assistance.

Types of mortgage loans interest rates
There are three types of mortgage loan interest rates in India: flexible-rate mortgages, fixed-rate mortgages, and interest-only mortgages.

A Fixed-rate Mortgage
A fixed-rate mortgage means the interest rate will never fluctuate during the span of a loan. Every month you will pay a fixed amount of interest calculated on the principal amount plus a small amount of the principal itself. Since every month a small percentage of the principal amount is paid off, the burden of interest becomes less intense. Fixed-rate loans are associated with less risk and therefore more expensive than long-term treasury bonds.

One of the most conspicuous advantages of a fixed-rate mortgage is you have to pay the same amount of interest even if market interest rates hike up in future. However, fixed interest rates are usually higher than other types of mortgages. In fact, you pay off a smaller amount of principal than other mortgages.

A Flexible-rate Mortgage
Flexible-rate mortgages are also known as adjustable-rate mortgages. Flexible interest rates keep fluctuating depending upon the economic status. These interest rates have a direct relation to prime rates.

Flexible-rate mortgages allow you to pay a low amount of fixed interest for a specified time. Another benefit is that your monthly payment could drop down if interest rates drop. However, there are slight chances that interest rate will go down in future. Usually it keeps rising that makes your payment larger.

An Interest-only Mortgage
An Interest-only mortgage allows you to pay a small percentage of interest only for a few years. However, the interest rate is fluctuating. In these types of loans, principal amount remains intact irrespective of interest amounts you have paid.

One of the benefits of this type of mortgage is you have to disburse a small amount of interests so you can buy an expensive home. Another benefit is that it provides flexibility. For instance, if you are not able to pay the principal amount due to other unexpected expenses, you can switch to interest payment only.

This type of loan is not suitable if you count on your job only, and you are not sure that prices of your new house will keep rising up.

Here is a list of some banks and their mortgage loan interest rates in India:

SBI Bank 10%
HDFC Bank 9.60%
ICICI Bank 9.50%
Axis Bank 9.75%
Kotak Bank 9.85%
IDBI Bank 9.90%
Dena Bank 10.05%
Bank of India 10.30%

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