Home Loan Interest Rates

Interest Rates 2017 1119 views

The home loan interest rate is an important factor that plays a crucial role in a home loan. Since it is a long-time commitment, it is very important for the customers to choose the lowest interest rate. By doing so, we can a lot of the total interest payable to the lender. The interest rates vary from lender to lender and thus it is vital to compare the same in order to grab the best deal. Hence, here are some of the top banks offering lowest home loan interest rates in India. You can compare the lowest housing loan interest rates and then choose the best home loan.

Interest Rate Comparison Tool

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Home Loan Interest Rates of Top Banks

BanksInterest Rate (in p.a.)
State Bank of India (SBI)8.30% - 8.60%
ICICI Bank8.35% - 8.85%
Bank of Baroda (BoB)8.30% - 9.30%
Axis Bank

8.35% - 8.75%

Citibank8.60% - 9.35%
Kotak Mahindra Bank8.35%
IDBI Bank8.35% - 8.65%
Bajaj Finance8.35% - 8.50%
LIC Housing Finance8.35% - 8.70%
Tata Capital8.75% - 9.05%
HDFC Limited8.35% - 9.05%
Indiabulls Housing Finance8.35% - 8.55%
PNB 8.35% - 8.45%
PNB HFL8.35% - 10.00%
Bank of India (BOI)8.35% - 8.50%

Home Loan Interest Rates

The interest rate offered by the bank determines the amount that you will be required to pay in terms of Equated Monthly Installments (EMIs) against your home loan. The interest rates of home loan are both floating and a fixed rate of interest. You can avail a home loan either on fixed or floating rate of interest. At a fixed rate of interest, the rate is fixed for the whole tenure of the loan whereas the floating rate of interest means it varies with the market conditions. Home loan on a floating rate of interest is offered on base lending rate plus a floating element thereof. Therefore, if the base rate changes, the floating interest rate also varies. It is also suggested that choosing the floating rate is better as you get a lower rate option.

Home Loan Interest Rate Calculator

The home loan interest rate calculator or the home loan EMI calculator is used in calculating the home loan EMI online. The tool is simple to use and gives results for EMI, the total amount payable within a few minutes. You just need to mention the basic details of your loan like the interest rate, the total loan amount and the tenure for which you want to check the EMI. The formula used for the calculation is as follows:

EMI=[P x R x (1+R)^N]/[(1+R)^N-1]

P= Principal Amount
R= Interest Rate
N= Number of Monthly Installments

Home Loan Interest Rate for Balance Transfer

The balance transfer facility is very beneficial for the customers who have an existing home loan linked to base rate. Post 1 April 2016, base rates have been replaced with Marginal Cost of Lending Rate (MCLR) as per the guidelines issued by RBI. Those who have a home loan linked to base rate, it is beneficial if the loan is transferred to another bank. By doing so, the borrower can save a lot on the loan repayment and lessen the burden of EMI. Almost all banks and NBFCs offer the balance transfer facility and presently some of the banks like SBI are offering the facility without any additional cost. The home loan balance transfer is also available at the same interest rate as a new home loan.

Difference between Base Rate and MCLR

The main difference between the two calculations is that the marginal cost of funds will have higher weightage while calculating MCLR. So, any change in key rates (increase or decrease) like repo rate brings changes in the marginal cost of funds and hence the MCLR should also be changed by the banks immediately. Let us see what is the difference between Base Rate and MCLR.

The main components of Base Rate system are;

  • Cost of funds (interest rates offered by banks on deposits)
  • Operating expenses to run the bank.
  • Minimum Rate of return ie margin or profit
  • Cost of maintaining CRR (Cash Reserve Ratio)

The main components of MCLR calculation are;

  • Operating Expenses
  • Cost of maintaining CRR
  • Marginal Cost of funds
    • After considering interest rates offered on savings / current / term deposit accounts.
    • Based on the cost of borrowings i.e., short-term borrowing rate which is repo rate & also on long-term borrowing rates.
  • Return on Net-worth
  • Tenure Premium (an additional slab of interest over the base rate, based on the loan tenure & commitments).

How to Convert Loan from Base Rate to MCLR?

The customers who have the loan based on Base Rate but want to shift to the new MCLR system can follow the below mentioned simple steps:

  • Request the lender to link the loan rate with MCLR instead of Base Rate.
  • Once the loan is linked with new MCLR rate, the customer can also request to reduce the quantum of ‘spread’. There might be a one-time fee which is the conversion fee for the reduction in Spread.

How to get Lowest Home Loan Interest Rates?

Home loans are the cheapest loans but there are certain factors based on which the lender offers the rate. Here is a brief of the parameters that matter when it comes to home loan rates.

  • Property Value- If the property for which you want to take the home loan is in an approved society, colony or area, there is a possibility that the lender will approve a higher loan amount and a lower rate as well. Generally, the maximum loan amount offered is 70-90% of the property value. However, some lenders do offer 100% loan.
  • Credit History- A good credit history or record is also important to be eligible for a loan. Thus, it’s important to maintain a good credit history in order to become eligible for a home loan.
    Relationship with Lender- A good understanding with the bank can go a long way in negotiating a good loan amount at lower rates. Through this way, you can easily avail a high loan amount and that too at competitive rate of interest without any hassle.
  • Monthly Income- Monthly income is one of the most important factors in deciding the eligibility for a home loan. If your monthly income is high, and you are meeting the eligibility criteria, there are chances that you will get a higher home loan. Higher income is helpful in getting the higher amount whether you are salaried or self-employed.
  • Age- This is also an important factor to decide the home loan eligibility. If you are applying for a home loan at an early age, there are chances that you will get a higher loan amount as compared to those who will apply for a loan in their mid 40 or in their 50s. So the early you apply, the more your eligibility will be for a home loan.

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