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Mixed, hybrid home loans

Mixed, hybrid home loans

Apnaloan.com Research Bureau

22 Apr 2008

A 'mixed' home loan provides an option of both, floating and fixed home loan interest rates put together.

These are also known as hybrid loans. A part of the loan amount is under the 'fixed' interest rate and the rest is under the 'floating' rate. The housing loan borrower can decide the proportion of the rates; it can be 50:50 or any other ratio that he chooses. The aim of the product is to help cushion the impact of frequent revision of interest rates.

However, Apnaloan.com would not recommend opting for a mixed loan for the following reasons:

  • This partly fixed and partly floating interest rate loan lack interest rate transparency.
  • The so-called 'fixed' portion may be varied and there is no objective mechanism to ensure that the 'floating' rate also floats down.
  • These risks remain even when you take a pure 'fixed' rate loan or a pure 'floating' rate loan but in any case you are not exposed to dual non transparency.

Remember, selecting the interest rate for your home loan is not a on-time decision and needs to be reviewed periodically.