Question

Property investment constitutes a large and longterm commitment to an individual. Describe the outcome of taking a property loan during fluctuating interest rates. This is from the book financial markets and instituons global edition 9th edition by mishkin.

Answer 1

Answer:

The property credit or loan can be applied and taken on the basis of variable rate or the fixed rate. The fixed interest rates don't change during the tenure of the credit or loan. Alternately, the variable interest rates could vary at a periodic basis. The interest rate may reorganize on a month to month basis, quarterly basis or yearly premise, contingent upon the conditions of the loan. On the off chance that taking fixed rate loan when the interest rate is changing, it might reimburse a higher than normal interest rate for the complete tenure of the loan. For variable rate loan, the periodic monthly instalments may vacillate significantly because of the ever-changing interest rates. The greater interest rates prompts higher periodic monthly instalments, a bit of the principal in addition to the interest collected for the month are needed to recompense each month.

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