What is Hybrid Home Loans?


When you apply for a Home Loan, you are either offered fixed or floating interest rates! However, with the introduction of the Hybrid Home Loans, a borrower can easily enjoy the advantages of floating as well as fixed Home Loan interest rates.

Let’s provide some quick information on Flexi Hybrid Home Loan and make you aware of its insights.

What is a Hybrid Home Loan?

As the name suggests, a Hybrid Home Loan has a combination of fixed and floating interest rate. When you opt for a Hybrid Home Loan, a lender offers a fixed interest rate for initial years and subsequently floating rates may apply. For a Housing Loan with a tenor of around 10 years, you may have to pay a fixed interest rate for the first 2 years and floating rates for 8 years. The floating interest rate is calculated on the existing outstanding principal loan figure, and it may undergo modifications at quarters.

Is it Good to Apply for a Hybrid Home Loan?

Hybrid Home Loans are an ideal solution for borrowers not having the affordability of dealing with hostile changes in their monthly outlay during loan’s initial years. If you are a young professional who has just begun your career, it could help you. Why? It’s because having a fixed EMI helps in better financial planning. Hence, it helps borrowers to save and invest in other key areas.

What about the Risk of Availing a Hybrid Home Loan?

A Hybrid Home Loan is nothing but almost similar to standard housing loans. As a matter of fact, no direct or apparent risk is involved with it. Banks and non-banking finance companies (NBFCs) promote such loans to compete with other teaser loans. As a result, you should always analyse the caps and margins if you are considering a housing loan. If you find both as low as compared to market standards, you may go for a Hybrid Home Loan.

How does Hybrid Home Loans differ from Teaser Loans?

The concept is simple to understand – every teaser loan may be considered a Hybrid Home Loan, but you can’t consider all hybrid loan as a teaser loan. Hence, if you are a first-time loan borrower, you may find it tough to make out the differences between the two and may be misleading. A teaser loan during the first 1 or 2 years is laced with a fixed interest rate, and it may be lesser than the current market rate.

Afterward, a high floating interest rate is applicable for the remainder of the loan tenor. You may see many banks, NBFCs and financial institutions offering teaser loans to lure customers. Hence, it is the duty of a loan seeker to go through the entire details of a loan before considering it to apply.

Can You Prepay the Hybrid Home Loans?

Since 2012, the National Housing Board and the Reserve Bank of India (RBI) have done away with prepayment charges on a Housing Loan with a floating interest rate. It clearly means that if a borrower is willing to prepay Hybrid Home Loans during the tenor with a fixed interest rate, a prepayment charge will be borne by him/her.

Are Hybrid Home Loans Financially Beneficial?

As you are now aware that a Hybrid Home Loan combines the benefits of fixed and floating Home Loan interest rates, it helps you curtail the effects of adversative fluctuations in the rates. What’s more, it also offers you to enjoy the benefits that initiate from the advantageous changes in these two loan rates.

The Bottom Line

You are now well-versed with the basics, benefits and other details of the Hybrid Home Loans; you can apply for it online after assessing your needs and affordability. All the best!