In the current economical situation, banks are finding it tough to retain the customers. Thereby, they are indulging in innovative and attractive products. Hybrid home loan is one such product where people get features of both fixed and floating types of loans merged into one entity. In simple words, borrower of such hybrid home loan will be required to pay fixed interest rates in the first and second years and later on floating rates will come into effect. ICICI and HDFC banks have already started offering hybrid home loans with different features and interest rate offers to lure the prospective customers.
The Process Of Procuring Hybrid Home Loans
Buying hybrid home loans is as simple as buying any other loan product but the process is a bit different due to the dual interest rate feature. Banks might ask customers to sign separate loan agreement forms- one for offering the fixed interest rate and another for the floating rate of interest. Most of the banks will remove the hassle of making customers sign multiple documents for a single loan. They will certainly combine them into one agreement which can be filled and signed without wasting the precious time.
Like any other loan product it is vital to read and understand the terms and conditions present in the agreement before signing it. Under the hybrid loans many banks offer the option of foreclosing the floating component attached to the loan if interest rates tend to move up. Some of the banks even offer the opportunity of converting the floating rates into fixed if interest rates go uphill.
Floating home loans are for those who possess high risk appetite thereby opting for hybrid loans will be seen a wise decision. You would be required to keep a track on the changing interest rates and make sure that the EMIs are easier to come up with. If you fail to keep a tab on the floating interest rates in the later period, then you might get surrounded by unwanted problems.
Legality of Hybrid Home Loans
Rumors that have been surrounding the legality of hybrid home loans have been snubbed by the RBI with a swift verdict. RBI has stated that hybrid home loans or the loan products offering dual interest are legitimate in nature but it has to abide the rules set by the RBI. Banks are relieved with this clarification and they are hopeful that the people will understand the benefit of choosing the hybrid home loans in the scenario of increasing interest rate present in the country.
Furthermore it should be noted that the floating rates attached with hybrid home loans are carefully linked with bank’s base rate which means they can be reduced further if there is a cut in the minimum lending rate. Currently hybrid home loans are offered by ICICI Bank with one and two year fixed options while HDFC offers three years and five years fixed options. SBI and Bank of Baroda also offer Flexi home loans which are a kind of hybrid home loans.