Different Types of Home Loan Plans – Qualification Criteria for Applying Housing Benefit

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Types of Home Loan Plans: If you are planning to buy a home then you should be aware of the fact that bank gives three types of interest plans. These three types of plans are the Flexi plan, floating plan, and fixed plan.

Before selecting any one of these plans it is necessary to understand the minute difference between these three. Here we will discuss on types of home loans with no down payment for first-time buyers and qualifying criteria for applying for housing benefit.

So let’s a have look at the difference between these plans and what plan you should select at what time.

What is fixed home loan plan?

Bank charge fixed interest rate in fixed home loan plan. This means that bank gives you a loan on a fixed decided rate. If there come any up down in the market or even if RBI reduces the interest rate in any condition still there is no change in interest rate given by the bank. There comes no change in the EMI one has to pay.

The main benefit in this type of loan is that even if the interest rate increases it will not have an immediate effect on you as the rate of interest will not increase for you.

Cons of taking fixed home loan plan

Once you take the loan under this plan, even if the interest rates goes down there will be no reduction in the rate of interest you took. This means you will still have to pay higher interest rate even when the rates are already down. It is also important to note that the interest rate on fixed home plan is 1 to 2 percent more. This is done considering the increased interest rates in the future.

One should keep in mind following points before taking loan under this plan

One should be aware that even if you take the home loan at fixed rate bank will not keep it fixed for the entire tenure of the plan. After few years it will convert your fixed interest rate into floating rates.

So it is necessary to be sure from the bank that up to how many years the interest rates will be fixed. Many times bank gives loan at fixed rates but adds a clause that if the interest rates will go very high from the decided value then the bank will take interest as per the floating rates.

What is floating home loan plan?

In floating home plan the interest rate of the loan is linked to the base interest of the bank. Hence when there is a change in the base rate there is increase or decrease in the interest rate of loan too. Interest rates in floating home loan are lesser as compared to the fixed home loan interest. Therefore your EMI is low as compared to the fixed loan plan.

Cons of floating home loan plan

If RBI increases the rate of interest then the interest rate on your loan increases too. In such cases, one has to pay more EMI than decided earlier. Hence if there are chances of increase in the interest rate then one should not take a loan under floating plan.

What is Flexi home loan plan?

The Flexi home loan is a combination of fixed and floating loan plan. This plan is also known as Hybrid home loan plan. The best thing about this plan is that at any point of time customer can change his plan from fixed to the floating or vice versa. Under this plan, for few years the interest rate is fixed and then gets converted to floating. In future, if the interest rate increases then to it do not affect ones EMI.

If you have fixed rate then even if the rates increases it do not levy any burden on you. On the other hand, if interest rate decreases you can convert fixed into floating and gets benefits of lower interest rates. One important thing to note is that this facility of changing the type of plan is given to the customer only once in the entire plan tenure.

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