Benefits of Low Interest Rates in Mortgages Loan
Taking a mortgage loan involves a number of intricate decisions such as – the potential assessment of putting an asset online, the volume of monetary requirements as well as the graveness of the requirement.
Compared to other loans, a Mortgage Loan Interest Rate is low owing to long tenures, and its secured nature. Being secured, banks and NBFCs require customers to pledge an asset as collateral for sanctioning the loan.
Hence, it eliminates the need for applicants to hold a good credit score, otherwise required for an unsecured loan.
Banks and NBFCs offer two types of interest rates with mortgage loan:
Fixed-rate interest rates remain constant throughout and don’t change throughout the entire loan tenure.
Floating interest rates are adjustable or variable and fluctuate during the loan tenure. The floating interest rates may be affected by inflation, monetary policy, economic growth, and other factors.
Of these two, fixed-rate mortgage loans can be beneficial as it offers the following advantages:
- Constant EMIs
One of the prime benefits of fixed mortgage loan interest rate is the constant EMI amounts. Thus, a borrower gets to evaluate their loan repayment schedule easily.
- Security Against Interest Rate Increases
Another benefit that borrowers get from fixed-rate mortgage loans is the security against interest rate fluctuations. Even if the interest rate rises, a borrower will get to take advantage of low interest rates.
This will also allow a customer to use a mortgage loan calculator to calculate their EMIs against their preferred tenure. Moreover, a borrower gets to eliminate the stress and anxiety he/she might have with floating interest rates.
- Easily Comparable
Fixed-rate home mortgage loans enable a customer to compare the various options available easily. With floating mortgage loans, one has to take into account the initial interest rates, duration of these initial rates, the percentage change in rates, and the number of times it might change.
Type of Mortgage Loans
A fixed-rate mortgage loan interest rate is available on the following types from banks and NBFCs:
A. English Mortgage
English mortgage is a type of loan where the customer agrees to repay the loan on a certain date. The property remains with the lender, who upon receiving successful repayment transfers them to the borrower.
If a borrower fails to repay his/her loan within the specified date, the lender will seize the property and liquidate it to fulfil all damages.
B. Simple Mortgage
With a simple mortgage, a borrower does not transfer the ownership of his/her property to a lender. The simple mortgage binds a borrower to repay his/her loan, failure of which will lead to his/her property being seized by a lender. Simple Mortgage Loan to move out from rental property in smart cities is the best move. The easy process with limited documents and quick approval makes it the best for user.
C. Reverse Mortgage
A reverse mortgage enables a borrower to receive monthly instalment against his/her property. A borrower can repay the loan after selling his/her property or let the banks or NBFCs seize it.
A lender will also give the option for loan settlement in case a borrower expires; in this case, also, a lender will seize the property if he/she fails to settle.
D. Mortgage by Conditional Sale
With mortgage by conditional sale, a borrower sells a property on condition that:
- He/she defaults on the mortgage payment on a specific date, and the sale becomes absolute.
- Upon successful payment, the sale will become void.
- Upon successful payment, the buyer will transfer the property back to the seller.
Although the transaction might resemble a sale, it is termed as a mortgage.
D. Mortgage by Deposit of Title Deeds
With a mortgage by deposit of title deeds, a borrower transfers his/her title deeds of a property to a lender when availing a mortgage loan.
With fixed mortgage loan interest rate, borrowers get the advantages mentioned above. They can also choose and apply for Mortgage Loan that different banks and NBFCs provides for their valued customers.