Home Loan Fixed Rate or Variable Rates

Here is the scenario: You just got a promotion and a pay raise from your employer. Now, you get reminded of your long term dream when you were just on the road to finishing your studies--you wanted a house. Now, being a mature corporate minded person, you would also want something that will rev up your credit standing and credit history. The best option for you, therefore, is to apply for a home loan.

The Types Of Home Loans: Fixed Rate Home Loan vs. Variable Rate Home Loan

A home loan is available in two types, the fixed rate home loan and the variable rate home loan. These types are zeroed in based on how you want the interest rate of your loan package to be.

What is the difference between a fixed rate home loan and a variable rate home loan? Check out this information:

• Fixed Rate Home Loan- in this kind of home loan, the lending institution gives you a certain timeframe for you to pay off your loan repayment by means of installment basis, for example, 12 months, as well as a rate of interest, say 10 percent. This means that, for a period of 12 months, you are supposed to pay loan repayment plus 10 percent interest, no more, no less.
• Variable Rate Home Loan- on the other hand, in this kind of home loan, the interest rate that is charged to you along with the actual loan amount is subject to fluctuations of interest rates in the stock market.

The Perks: Fixed Rate vs. Variable Rate Home Loans

Now the question is, which home loan is better, the one with the fixed interest rate or the one with the variable interest rate? That will be left on your own discretion, but here are some pointers.

• Fixed Rate Home Loan- you get discounts, and you get a clear view of how much you are going to pay next. However, the penalty is usually more strict.
• Variable Rate Home Loan- you get a lot of bonuses, at the same time, get to pay a little more every repayment period if you want to relieve yourself of your loan faster.