Demystifying Composite Housing Loans: What They Are and How They Work
What are Composite Housing Loans? Composite housing loans are a type of home loan that combines two different types of interest rates: fixed and floating. These loans are designed to offer the borrower the benefits of both types of rates, providing stability and flexibility in their repayment plan. The loan amount is split into two portions, with one part attracting a fixed interest rate for a certain period and the other part having a floating interest rate that fluctuates with market conditions. How Composite Housing Loans Work Loan Segmentation The total loan amount is divided into two parts: fixed-rate and floating-rate portions. The division can vary depending on the lender's policies and the borrower's preferences. Fixed-Rate Component For a predetermined period (usually the initial years of the loan tenure), a part of the loan is subject to a fixed interest rate. This means the borrower pays a consistent EMI (Equated Monthly Installment...