The festive season is upon us, and if you’re thinking of buying a new home or refinancing your current mortgage, it’s important to consider the different types of mortgage loan available to you. The type of mortgage loan you choose will depend on your individual financial goals, as well as your personal financial situation.
Understand Best Types of Mortgage Loans in India
There are generally two types of mortgage loans available to borrowers in India: Fixed Rate Mortgages and Adjustable Rate Mortgages.
-
Fixed Rate Mortgages
A Fixed Rate Mortgage is a mortgage loan that has an interest rate that remains the same for the entire term of the loan. This means that your monthly mortgage payments will always be the same, no matter what happens in the economy or financial markets.
Fixed rate mortgages are a great option for borrowers who are looking for stability and predictability in their housing expenses. If you’re on a tight budget, a fixed rate mortgage can help you manage your finances without worrying about increasing interest rates.
The downside of a fixed rate mortgage is that you may end up paying higher interest rates than you would with an adjustable rate mortgage (ARM) if interest rates fall over time. Fixed rate mortgages are also less flexible than adjustable rate mortgages, as you will not be able to take advantage of lower interest rates without refinancing your mortgage.
-
Adjustable Rate Mortgages
An Adjustable Rate Mortgage (ARM) is a mortgage loan that has an interest rate that fluctuates over time. This means that your monthly mortgage payments will also fluctuate over time, depending on the current interest rate index.
Adjustable rate mortgages are a good option if you’re planning on selling your home in the near future or if you expect interest rates to fall over time. With an ARM, you can take advantage of lower interest rates without having to refinance your mortgage.
The downside of an adjustable rate mortgage is that your monthly mortgage payments can increase significantly over time if interest rates rise. This can make it difficult to budget for your housing expenses and can lead to financial stress over the long term.
-
Interest Only Mortgage Loans
Interest only mortgage loans are a type of mortgage loan in which you only pay the interest on the loan for a specified period of time. After this initial period, you will need to start paying both the principal and interest on the loan.
Interest only mortgage loans are a good option if you’re looking for lower monthly mortgage payments in the short term. However, you should be aware that interest only mortgage loans can be risky, as they require you to make larger mortgage payments later on in the loan term.
-
Balloon Mortgages
A balloon mortgage is a type of mortgage loan that has a large payment due at the end of the loan term. This large payment is typically 10 to 20 percent of the total loan amount.
Balloon mortgages are a good option if you’re planning on selling your home before the balloon payment is due. However, if you’re unable to make the balloon payment when it is due, you may be forced to sell your home or refinance your mortgage.
Mortgage Rates in India
Mortgage rates in India vary depending on the type of mortgage loan you choose and your individual creditworthiness. In general, interest rates for fixed rate mortgages are higher than interest rates for adjustable rate mortgages.
Interest rates for mortgage loans in India are also affected by the Reserve Bank of India’s monetary policy. When the Reserve Bank of India raises interest rates, mortgage interest rates also tend to rise. Conversely, when the Reserve Bank of India lowers interest rates, mortgage interest rates tend to fall.
Types of Mortgage Loan
Apart from the above-mentioned mortgage loans, there are some other types of mortgage loans are available in India, which are:
-
Government-Sponsored Mortgage Loans
The government of India offers several mortgage loan programs for homebuyers, including the Pradhan Mantri Awas Yojana and the Affordable Housing Fund. These government-sponsored mortgage loan programs offer lower interest rates and reduced down payment requirements for eligible borrowers.
-
Jumbo Loans
Jumbo loans are mortgage loans that exceed the maximum loan limits set by the government-sponsored mortgage loan programs. Jumbo loans are typically used to finance higher-priced homes and may have higher interest rates and more stringent credit requirements than other types of mortgage loans.
-
Reverse Mortgage Loans
Reverse mortgage loans are mortgage loans that allow eligible borrowers to convert their home equity into cash. Reverse mortgage loans are typically used by senior citizens who have a high amount of home equity and need additional income to support their retirement.
Conclusion
If you’re unsure which online mortgage loan is right for you, you may want to speak with a mortgage loan specialist who can help you navigate the different options and choose the type of mortgage loan that best suits your needs.
Choosing the right mortgage loan type is a crucial decision that can have a significant impact on your financial future. It’s important to consider your individual financial goals, as well as your personal financial situation, when deciding which type of mortgage loan to choose.
Some borrowers may prefer the stability and predictability of a fixed rate mortgage, while others may prefer the flexibility of an adjustable rate mortgage. Ultimately, the type of mortgage loan that you choose will depend on your personal preferences and financial goals.