| Some time back some banks came out with new type of interest rates loans known as "teaser rate loans". Earlier there used only 2 types of Home Loan rates viz; fixed & floating rate loans. In fixed rate loans, the rate of interest would remain fixed throughout the tenure of the loan and therefore your EMI payments. In case of floating rate loans, the situation would be exactly the opposite. The interest rate on your loans will vary with the interest rate declared by your bank & accordingly your EMI payments are also likely to increase or decrease with the interest rates. Now some of the banks have come out with a innovative home loan products known as teaser rate loans. Here the interest rates remain fixed for initial 3 to 5 years but become flexible after that. So it's possible that you pay 8% pa interest in 1st year, 9 & 9.5% pa in 2nd & 3rd year and 11% pa 4th year onwards if interest rates in the economy shoots up 4 years from now. This will directly have an impact on your EMI payments. You are therefore advised to consult your Financial Planner before finalizing your Home Loan. |
Mr. Nirav Panchmatia, the founder CEO & Chief Strategist of "AUM Financial Advisors" is a Mutual Fund Expert, Financial Planner & Wealth Manager. He is a CA & MBA Finance from Narsee Monjee (NMIMS), Mumbai having spent last 8 years in Mumbai working in leading financial institutions like Citigroup, ICICI Bank, IRIS, Quantum Group etc. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the Indian Indivonly)idual Investor. He also regularly conducts financial literacy seminar. The above article is meant for general reading
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