Once you have decided to take a Home Loan, the next thing to consider is the interest rate applicable. There are three most common types of Home loans available. A number of banking terms are used by the banking sector when we approach them in lieu of buying a Kerala Flat or apartment. The housing finance companies use terminologies like fixed rate, adjustable rate mortgages, and balloon mortgages which can at times be confusing to laymen. It pays well to be well aware of these words. If you already have a place of your own to stay until the loan is fully paid, then a â??fixed rateâ?? home loan will suit you the most. Under this scheme, you will be assigned a fixed interest rate, and the interest rate will not change during the loan tenure. Even when the interest increases, under this interest scheme, your rate of interest will remain the same. However, if interest rates tumble you will have to continue paying the higher rate, though you have an option of refinancing at lower rate. In Adjustable Rate Mortgage scheme, the interest rate fluctuates with the market. This type of scheme is mainly for short-term investors. It allows you to take the benefit of low interest rate. Another benefit is to the one who buys a home when rates are falling and later shifts to fixed rate home loan when rates go up. However, if you are planning to hold the house only for a short period another scheme known as the Balloon Mortgage loan scheme may be of interest to you. Here interest rates are much lower than the other two schemes. You make monthly payments for a fixed amount of time at fixed rate and at the end of the payment schedule; you will have to pay the unpaid balance as one lump sum. The advantage of this type of loan is apparently for those who intend to sell the place in a short period.
