Renting a one-bedroom flat in Pune can cost you Rs. 17,000 per month and a three-bedroom unit will tentatively cost you around Rs. 33,000 per month. On the other hand, the real estate market is the city is seeing a downturn with prices falling around 13% between 2016 and 2018.
Hence, investing in a property is comparatively more beneficial than opting for a rented location. You can utilize the rent amount to pay loan EMIs and purchase a house in the city.
Therefore, opting to buy a house using a home loan in Pune is a decision that will save you a lot of money in the long run.
There are generally two types of loans based on interest rates. Home loans come with either a fixed or a floating rate of interest. These are discussed in detail below.
Types of Housing Loans Interest Rates
- Fixed-Rate of Interest
Fixed interest rates do not change over the tenor. They remain the same irrespective of market forces. Compared to floating interest rates, they are generally higher.
These rates provide a greater sense of security when the markets fluctuate. An increase in MCLR does not affect these interest rates.
At present, a fixed rate of interest on home loans in Pune is generally provided for only a limited period of the tenor. After the stipulated period is over, the rates are set back to floating that can either go up or down depending on market forces.
- Floating Rate of Interest
Floating rates can change over the loan tenor. Depending on market conditions, this variable type of interest rate can increase or decrease.
The marginal cost of the fund-based lending rate has exercised a high degree of control in this case. If MCLR goes up, the interest rate will also go up. If it decreases, the interest rate will fall. Therefore, they carry a risk coefficient.
An advantage of choosing this type of home loan interest rates is that they require no pre-payment and foreclosure charges as per provisions of the RBI.
If you are confused, learning how to choose between floating and fixed interest rates can help you lower the cost of a loan.
Home loans can also be differentiated based on the availability of government schemes. There are traditional loans that are not linked to any subsidy schemes, and there are subsidized loans.
- Traditional Home Loans
These refer to loans that are not linked to any subsidy scheme. They are provided by all financial institutions and non-banking financial companies (NBFCs). They charge interest rates according to the MCLR of the lending institution.
You can calculate monthly EMI obligations on your home loan by using a home loan calculator. They do not require an additional application process through government subsidy portals.
- Subsidized Home Loans
The Government of India, as well as respective state governments, has launched many housing schemes that provide subsidized home loans. The government provides the subsidy on interest payments of such home loan offers.
One of the most popular government schemes is the Pradhan Mantri Awas Yojana for home loans. This scheme provides an interest subsidy of up to 6.5% on home loans. You can avail PMAY in three categories: Economically Weaker Sections (EWS), Low Income Group (LIG) and Middle Income Group (MIG).
Additionally, you can also opt for home renovation loans to upgrade your house. These loans are unsecured and offer income tax benefits up to Rs. 30,000 under Section 24(b).