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After ICICI Bank, Axis Bank and HDFC, HSBC, too, has come up with a dual-rate housing loan product.
It allows borrowers to choose an initial fixed rate period of between one and five years, and after that migrate to a market-linked, floating rate system.
The scheme offers two options – one where the customer is not allowed to make any pre-payments during the fixed-rate period and the other where he/she can do so, as per certain terms.
The fixed rates in option 1 range from 11.25% per annum (if the initial fixed-rate period is one, two or three years) and 11.50% (fixed-rate period of five years). For the flexibility of pre-payment offered in option 2, the bank will charge 25 basis points higher than in the first option as interest.
But, if you choose the five-year fixed-rate option with flexibility to pre-pay, the structure will be a little complex. Prepayment of over 25% of the outstanding amount will attract charges of 5% in the first year, 4% in the second, 3% in the third, 2% in the fourth and finally 1% in the fifth year. Upon expiry of the fixed rate period, the interest rate will be linked to the bank's rate prevalent then. So, for the balance tenure, the loan will carry an interest rate of base rate plus 2%.
Home loan-seekers unwilling to stomach fluctuations in interest rates can consider applying for this loan.
Interest rates are expected to start softening in the last quarter of 2011-12 and, hence, it may not be a great idea to lock into any kind of fixed-rate loan scheme now.
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Some of the Top performing Mutual Funds are
- HDFC Top 200 Fund
- ICICI Prudential Dynamic Plan
- DSP BlackRock Top 100 Fund
- Birla Sun Life Front Line Equity Fund
- Reliance Equity Opportunities Fund
- IDFC Premier Equity Fund
- SBI Magnum Contra Fund
- Sundaram Select Midcap
- UTI Dividend Yield Fund
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