Planning Your Dream Home This Festive Season: How Interest Rates Can Affect Your Decision

Festivals represent joy, success and fresh beginnings. It is the most auspicious time to engage in new ventures, especially buying real estate. Developers aggressively promote their projects during this time, knowing prospective buyers are most inclined to purchase property during the festive months. To attract more borrowers, loan companies also offer fantastic loan deals. If you are planning to buy your dream home this festive season, let's see how the Home Loan interest rate can affect your decision.

Types of Home Loan Interest Rate

The interest rate plays a crucial role in determining your borrowing cost. When you borrow a loan, the interest rate determines the interest amount you will pay over the tenure. The higher the interest rate, the more you will pay. Interest rates on housing finance can be of two types: fixed and floating. Let’s see what they mean:
1. Fixed Interest Rate: If your loan plan has a fixed interest rate, it will remain constant throughout the repayment tenure. It provides stability and predictability in the EMIs, helping you plan for the repayment more efficiently.
2. Floating Interest Rate: A floating interest rate, also known as a variable rate, depends on a benchmark rate, such as the MCLR (Marginal Cost of Funds-Based Lending Rate). Your Home Loan interest rate changes with fluctuations in these benchmarks, affecting your EMIs and total loan cost.

Impact of Interest Rates on Borrowers

Apart from attractive property prices from developers, lenders also provide credit at enticing interest rates during the festive season. Therefore, it is the best time to receive the maximum value for your money. The lower interest rates on Home Loans during this time impact borrowers in many ways, including the following:
· Monthly Instalments: Discounted interest rates during the festive season primarily impact the monthly instalments. Even a slight difference can reduce the monthly EMI amount, leading to significant savings over the tenure.
· Repayment Tenure: The interest rate can influence the loan tenure you select. A lower interest rate can allow you to choose a shorter tenure to repay the loan. Eventually, you can become debt-free sooner with a shorter tenure and budget-friendly EMIs.
· Loan Affordability: Reduced interest rates during the festive season impact your affordability. Access to Housing Loans at a lower interest rate gives you the financial freedom to look for a better property. 

Tips to Apply for a Home Loan During the Festive Season

Given the potential impact of Home Loan interest rates during the festive season, it is essential to be well-prepared before applying for a home loan. Here is how you can prepare yourself:
· Research and Compare: Before finalising a loan deal, research and compare the interest rates various lending institutions offer. Even a tiny difference in the interest rates may lead to significant savings over the repayment tenure. However, interest rate is not the only factor to consider. Compare the loans based on several other factors, including the loan amount, LTV ratio, repayment terms, processing charges, eligibility and documentation requirements, customer service, etc.
· Understand the Terms: Fully understand the loan terms, including whether they offer fixed or floating interest rates. In the case of a floating interest rate, the rate may rise with changes in the benchmarks. You must build flexibility into your budget to accommodate changes in your monthly EMIs. So, choose your option according to your requirements and predictability.
· Save and Stay Informed: Exhausting all your savings on the property purchase is not the wisest thing to do. When looking for a property, ensure you have sufficient money in your account to serve as an emergency fund. It should be enough to cover the expenses for at least a few months. Moreover, stay informed about the latest RBI announcements and market trends.
Home Loan interest rate is an intrinsic component of the financial landscape, and you cannot overlook its impact on Home Loans. You must understand the workings and implications of interest rates and develop strategies to navigate the fluctuations. Research, stay informed, and make prudent decisions to ensure you can complete your homeownership journey this festive season. Careful planning, a proactive approach when planning to apply for a housing loan from Kotak Mahindra Bank can help you confidently embark on your home-buying journey at reasonable interest rates.