Veronica Hines

Planning to buy your own home of the dream but don’t know how to deal with the financial part? If yes, then we are here to help you in knowing which one is best for you; floating or fixed-rate loans in Denver. When you think of getting a loan application, there are numerous complexities that the homeowner faces. Before signing the loan papers, you should be clear about some important concepts that include the principal amount,  EMIs, interest rate, and repayment tenure.

Go to any bank, you will be offered with the two interest rate options that are fixed and variable loans for a home loan. When we talk about fix rate loans in Denver, the interest rate remains constant throughout the tenure. While the interest rate varies if you apply for the floating interest home loans. The interest rate in the fixed loan is much higher than the floating interest loan.

Advantages of Fixed Interest Rate:

• No matter what are the market conditions, the interest rate remains fixed. This allows the feeling of protection, especially against dynamic market conditions.
• People who are good at budgeting and know tricks to save money, fixed home loan interest rates are ideally made for them. This type of loan helps in making long term budgeting.
• When it comes to security and certainty, this type of loan provides long term planning.
• Fixed interest rates are usually 1%-2.5% higher than the floating or flexible interest rate.
  
  Advantages of Floating Interest Rate:
  
  
• One of the biggest benefits of applying for the floating interest rate is that it is typically lower than the fixed interest loan. It can be applied by the people who do not have a good financial condition.
• If there is any market trend interfere in between, it will impact the floating interest loan for a while and you don’t have to pay the same interest throughout your loan tenure.
• The loan repayment duration is likely to be shorter than the fixed interest loan. Hence, it becomes best for those people who are looking for shorter loans in the near future.
• People are more biased towards the floating interest rate and has become the first choice of the homeowner as it starts from 8.70%.
  
  Choosing Between a Fixed and Variable Rate Loan
  
  Now, this is the biggest question for someone who is out to look for the home loan as it is a long term investment. You should know your demands and current condition of paying back the loan as it is more like a gamble. Once you are duped in the process, it can make you insolvent. Check your current and future financial situation and the specifics of each loan. This step will help you to choose between both of these loans and what will suit you best. Meanwhile, do not forget to understand that the interest rate is only one part of the total cost of your home loan. Apart, from this factor, do consider term length, lender fees and servicing costs as it will impact the overall incurring expense.
  
  Comparison between Fixed and Floating Interest Rate
  
  
• Fixed Interest Rate    
• Higher Interest Rate    
• Not affected by financial market conditions    
• Fixed EMIs    
• Budget planning possible    
• Sense of security    
• Suitable for the short/medium-term (3-10 years)    
• Lesser risk        
  
  Floating Interest Rate
  
  
• Lower Interest Rate
• Affected by changes in the financial market
• EMIs change as per interest rate or MCLR
• Difficult to budget or manage financials
• Generates savings
• Suitable for long term (20-30 years)
• Higher risk