Article

Reset of Interest Rate
June 07 , 2012

The interest rate on home loan can vary based on market conditions. This applies every quarter to floating rate loans, but even so-called fixed rate home loans are not immune to change. A reset of interest rate is an event where the applicable interest rate on the loan is changed in response to market conditions.

Reset of interest rate might have one of two effects, based on the loan document. It may change the monthly installment, without affecting anything else. But more commonly, it can change the tenure of the loan, while keeping the installment same. An increase in interest rate then makes the loan last longer than the original schedule.

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