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Pros and Cons of Fixed rate Home Loan

Benefits of opting for a fixed interest rate:

  • Your EMI remains the same irrespective of the conditions prevailing in the market
  • It is a great option for those who are good at budgeting and do not want their monthly outgo to go haywire because of market conditions
  • Gives the borrower a sense of security and peace of mind.

Drawbacks of opting for a fixed interest rate:

  • The major disadvantage of a fixed rate of interest is that it is at least 1-2.5% higher than a floating rate of interest.
  • The other disadvantage of such a loan is that if the interest rates decrease significantly, a borrower who has opted for a fixed rate of interest does not get any advantage.

As a borrower, you must also cross check with your bank whether you are allowed to fix your interest rate for the entire loan tenure or only for a few years. If you perceive that the interest rate cycle will be on the rise for the next few years, it’s a good idea to be locked under the regime of a fixed interest rate on your home loan.