SBI the first bank to introduce the innovative product in the housing loan category – teaser rate schemes – home loan offers which carry a fixed rate of interest for first few years and then floating rates for the remaining tenure. In other words the rates offered are in the nature of fixed rates for the initial two or three years, and during the rest of the tenure the borrower will be charged floating rates of interest which will be much higher than the first few years.

These dual rate schemes became a rage in 2009 and are still in high demand.
Teaser Rates are very low interest rates offered for initial years by Banks/Housing Finance Companies (HFCBs).

SBI is the only bank who is continuing the teaser rates till 30^th June 2010. Teaser rates are genuinely valid interest rates although they relate to a very small part of the loan tenure.

To better understand the implications of teaser rates, you would need to compare the different EMI you could end up paying using the EMI calculator on www.deal4loans.com and decide which bank offers loan suitable to your need.

An appropriate comparison could be done by computing the interest component. This is the excess of all payments made over the original loan sanction amount. But the acid test lies in working out the internal rate of return (IRR) for these three schemes. For assistance please contact our customer care representatives at deal4loans.

Advantages: From the customer’s point of view

• Teaser rates provide a definite initial advantage. The burden on the borrower is highest at the start of the loan and lowest at the end of the tenure.
• The salary/business income of the borrower would increase with the passage of time whereas the EMI is constant during the entire tenure of the loan.
• It is also towards the end of loan tenure that small changes in specifications/interiors, etc. of a house under construction may be necessitated. The borrower may have to fund these changes from his own finances.
  If the borrower had to pay for these from his/her salary, it would hit the cash surplus he/she would have, making the payment of initial EMIs very challenging.

Teaser rate schemes have been providing much needed relief as the EMIs are lower when compared to the borrower not opting for teaser rates while considering loan options.

You might find these relevant:

• Bank of India Home Loan Bangalore | Interest Rates | Documents | Eligibility
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• Bank of India Home Loan Mumbai | Interest Rates | Documents | Eligibility | Information
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