With so many companies already present and many more waiting to enter the field, the competition is set to strengthen further. Lending institutions have engraved processing fees and are giving sops under various heads. Interest rates low and there is a war between various home finance companies, the consumer is the ultimate winner. Leading housing finance companies called as hfc are flooded with inquiries and customers are queuing up at their offices with applications. Many finance companies are making a beeline to get into housing finance business.

What makes this sector so attractive?

Despite the facts that it has margins lower than that offered by other activities like vehicle finance and consumer finance, the housing finance is a low risk business where institutional lending comes much easier. It makes business sense for the banks and finance companies to undertake this activity. Besides a favorable tax and regulatory government makes things much easier. Housing loans are primarily long term in nature, so a fluctuation in interest rate affects the loan cost considerably. It is very difficult to calculate interest rate movement and it becomes even more difficult for loan seekers to decide whether to wait for the drop in interest rate or buy. Hfcs have identified this state of problem and have introduced two types of housing loan. They are fixed interest and floating interest loans. The question arises, which one is best suited for the borrowers.
Fixed interest loans charge an interest, which remain same through out the term of the loan. This means that the consumer is protected to market risk and the fluctuation in the interest rates. Fixed rate is a good option when the interest rates are predictable to move up in future.

Look before leap

After decided to go in for a housing loan and have also identified which one, it is important to know how much money one can borrow. The loan amount granted also depends upon the repayment capacity. The loan is repayable in the form of equated monthly installments called EMI. The EMI should not exceed 50 per cent of the monthly household income.

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