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Your questions – Loans: only take out a fixed-rate mortgage if it is for a period of 5 to 7 years

By Chaitali Dutta

As interest rates are likely to rise in the near future, should I take out a fixed rate home loan at lower rates?
—Vimal Kishore

If you are taking out a loan with a term of 15 to 20 years, it may be better to opt for a variable rate loan as the long-term commitment can be costly. However, if your loan is for 5-7 years, a fixed rate loan would be preferable. In the latter case, you will not be allowed to repay the loan early.

I will retire after two years. My son wants to take out an education loan for his higher education. Will a bank grant me the loan or do I have to liquidate some investments?
—Gopal S Raju

The education loan is basically the responsibility of the child to pay once the education is completed and she is gainfully employed. As a parent, you are there as a co-borrower to ensure interest payments for the duration of the course. If the loan is for a degree or course where there is a high chance of employment after completion, then you should go ahead. However, if the education is a basic degree, using your strengths would be a better bet.

AAre all repo rate mortgages calculated using the monthly declining amortization method?
— Rajiv Charan Saxena

On paper, most banks say they use a daily declining balance to calculate interest on your home loan. This is advantageous for the borrower in the event of additional repayments to the EMI. However, if the repayment is only through an EMI, the interest for the daily declining balance and the monthly declining balance are almost similar.

Is female ownership mandatory for a married couple to get the PMAY grant. The loan was taken in December 2019. The bank denies the same point.
—Rajesh Kar

In the case of a married couple, either the spouse or the two co-ownership together will be eligible for a single PMAY grant under the CLSS.

The author is the founder, AZUKE Personal Finance Advisory (www.azukefinance.com). Send your questions to [email protected]


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