A few important aspects you need to go into.

• Scheme of loan

Whether the loan is a fixed or floating rate one. As is common knowledge, in case of floating rate loans, the interest rate will move up or down with each revision in the benchmark rate of the bank. In case of a fixed rate loan, the interest rate may remain fixed for either a given period of time or entire tenure of the loan.

• Rate benchmark

In case it's a floating rate loan, what the rate is benchmarked against is important. Usually, floating rates are determined with reference to the prime lending rate (PLR), fixed at the time of taking the loan plus a mark-up. If your home loan is at a spread of one percent to the PLR, which is say 10 percent, you will pay an interest rate of 11 percent per annum.

How often the bank changes the benchmark rate should be checked. Banks periodically revise the PLR to which the home loan interest rate is pegged.

If one has opted for a fixed rate loan, it is to be checked whether the interest is fixed for a part of the tenure or the entire tenure. Do check the reset clauses. The bank normally reserves the right to revise the interest rates upwards or downwards, once in three or five years, even on a fixed rate loan.

• Charges

Also check whether the loan can be prepaid, and if so, what the charges are. It may be a fixed fee, a percentage of the loan outstanding, or a percentage of the loan amount. Further, there may be a restriction on the number of prepayments you can make during the tenure of the loan.

Check what the other charges you will be required to pay to get the home loan are. There could be a fee for processing, services, and administration.

What is PLR and how does it impact home loan interest rates?

PLR stands for prime lending rate. It is the benchmark rate of interest at which banks lend to borrowers. When the Reserve Bank of India (RBI) takes measures to control inflation or liquidity, many public and private sector banks react by raising their benchmark lending rate. This makes home, personal and vehicle loans costlier, dampening credit demand.

Why go for floating rates in these conditions?

To float or get anchored is a vital dilemma for many borrowers at this juncture. Experts point out that rates at this juncture are still high and may drop further down. Since fixed rates are a few points higher than the prevailing floating rates, it makes no sense to get anchored.

When will existing borrowers benefit?

Only a few banks have reduced the interest rates for existing borrowers. In order to entice new borrowers in this dampened climate, low rates are offered to them. So for now, existing borrowers have to wait for rates to fall substantially before the benefit reaches them. Borrowers unhappy with their lenders can consider refinancing with another lender offering better rates.