The Right Interest Rate

     

As we all know that the interest rates the bank refers to in calculating a housing loan is Minimum Loan Rate (MLR) or the interest rate for first-class major clients.It’s a floating adjustable interest rate:the interest rate goes up, the payment inreases but if the interest rate is down,the payment will go down as well.
       Therefore, during this time, if home buyers choose to lend money with a floting adjustable interest rate, they will have the advantage when the bank decreases interest rate - -their onthly payment will be lower.Thought the borrowers pay the same amount of monthly payment but the difference of amount each month can help decreasing the principal if they pay some month higher than they should.(Keep in mind.if the interest rate can go down,it also cal go up)
However, nowadays, home loan doesn’t have only a floating adjustable interest rate, almost every bank has special interest rate to attract clients and compete with other financial institutes such ac the compound interest, the interest rate that combines the floating rate with the fixed rate.The bank will apply the very low fixed rate during the first and second year of the loan,after that it’ll apply the floating rate which is higher than the former.For example,the fixed rate is 4.50% in the 1ST year, 5.00% in the second year and MLR interest rate unit the end of loan period.
        To borrow money with this kind of interest rate, the borrowers have to consider the interest rate after the fixed rate of interest.Before choosing to make a loan,it’s necessary to compare the MLR of each bank because this interest is the main interest for housing loan.At present,the interest rate between the big bank and small bank is quite different,1-1.5% , and the difference of interest rate affects the monthly payment.
       Also, the compound interest fixes the interest rate only in one,two or three years,and in every year, the rate increases.Inorder to compare the interest rate of each bank,home buyers have to averagely calculate the rate for the whole 3 years not only the first year.
        Of course the best way to save money is to choose the lowest interest rate because the interest is the most important payment for a loan.However,the interest is the last and only expense related to home loan;there are other expenses especially the loan fee,which could be exempted in some bank but it’s usually at 1% of the total amount of the loan.
       It’s noticeable that the bank that offers low interest rate always has a loan fee.Besides,there’s a fine in case the redemption is completed ahead of schedule at 2% or 3% depends on each bank’s policy.Some fines the borrowers when they pay the installment higher.Moreover,the conditions for the borrows are different.Theerefore to choose the interest rate depends on each person’s condition and situation.