Picking the wrong home loan rate can cost you more than you think

Floating rates move up or down with market conditions, usually linked to a benchmark like the repo rate.

Buying a home is a big milestone — and the loan you take for it can stick around for decades. The type of interest rate borrowers pick in the beginning can make a huge difference later. Choosing between fixed and floating rates isn’t just about comfort, it’s about how much risk you can handle when the market moves.

When fixed rates feel safe but cost more

Fixed-rate loans sound comforting. Your EMI doesn’t change, and you know exactly what you’ll pay every month. But that stability comes at a price. Fixed rates are usually higher than floating ones, and if market rates fall, you don’t benefit. Many borrowers who locked in their home loans when rates were high ended up paying much more than those who stayed flexible.

Floating rates: cheaper but unpredictable

Floating rates move up or down with market conditions, usually linked to a benchmark like the repo rate. They start lower than fixed rates but can rise suddenly when the central bank hikes rates. Borrowers who took floating loans during low-rate periods have seen their EMIs jump sharply in the past few years — stretching household budgets.

Why switching can save you money

If you’re stuck with a high fixed rate, it might be time to explore a switch. Most banks allow balance transfers to other lenders at lower floating rates. Even a 0.5-1 percent drop in your interest rate can save you lakhs over the loan term. Just make sure you factor in processing charges or transfer fees before deciding.

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Don’t chase short-term comfort

A common mistake is choosing a fixed rate because it feels safer, without thinking long-term. If you plan to keep the property for many years, a floating rate often makes sense — it tends to even out over time. But if you’re close to retirement or want complete predictability, a fixed or hybrid loan might still be better.

The takeaway

Interest rate choices can make or break your loan experience. Review your home loan statement, compare your current rate with what other banks are offering, and don’t hesitate to negotiate or switch. A small change in percentage today can mean a big difference in peace of mind — and in your pocket — tomorrow.