For instance, the EMI for a 20-year home loan of Rs 1 crore will be Rs 75,739 @6.7%. The same will go upto Rs 81,787 @7.7% and jump to Rs 88,052 @8.7%. The best thing to do in situations like this is to go for fixed-rate loans. However, the options are very limited and only a few options offer fixed rates that too for a limited period. More importantly, these partially fixed-rate home loans also charge higher interest rates.
Partially fixed loans will cost you more
Consider the additional costs before going for partial fixed loans.
While these rate increases are not in your hand, you can be prepared for that by assuming a higher rate of interest. “Instead of the very low rates now, assume a reasonable home loan rate of around 8.5% and invest the remaining EMI somewhere else systematically,” says Aparna Ramachandra, Founder & Director, Rectifycredit.com. For instance, the EMI for a 20-year home loan of Rs 1 crore is Rs 86,782 @8.5% and will be Rs 75,739 @6.7%. You should invest the difference of Rs 11,043 in a short-term debt fund every month. This corpus will act as a backup if the rates go up. You will be in a better position even if the rate doesn’t go up because this money will be getting into savings instead of spending.
