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How Do I Choose a Home Loan Lender?

Highlights

  • Choosing the right home loan lender is important to curb your interest payment and enjoy flexibility at the same time.
  • Let’s choose the right lender here by comparing lenders based on interest rates, processing fees, etc.

Choosing the best lender for a home loan is half the job done for you. It not only helps you keep your loan obligations to the lowest extent possible but also offers you a greater degree of flexibility. The interest rate may be the top consideration, but that should not be the only concern.

Even stuff like processing fees and prepayment norms should matter to you. You may not find a lender having all the benefits, and that’s fine! The competition in the home loan space has intensified amongst lenders where one overtakes the other at some point or the other. But as a borrower, your range of options has expanded greatly.

We will thus show you the offerings of lenders against different home loan aspects – interest rates, processing fees, prepayment norms, and even a balance transfer for existing customers. With that, you can compare different home loan lenders and choose the one for yourself.

Compare Home Loan Lenders Based on Interest Rates

The home loan interest rate remains the primary concern for borrowers as they dictate terms to you if you don’t choose it wisely. You will realize it soon when you start paying the Equated Monthly Installment (EMI). But sometimes the EMI becomes much lesser, yet the overall interest outgo remains much higher than you would imagine. It could be due to both higher interest rates and a much-extended home loan tenure. Let’s check the interest rate of top home loan lenders and choose the best one for you.

Which Lender Charges the Least Processing Fee?

The home loan processing fee can either be a flat sum or a certain percentage of the loan amount. As the home loan amount remains quite high, the processing fee would be relatively higher compared to other loans. Some lenders even waive off the processing fee for a certain duration. Keep an eye on such offers for more savings. That means you should compare the fee of different home loan lenders and see which offers the least. We can help you with this by showing the fee of different lenders in the table below. Take a look!

LendersProcessing Fees
SBI0.40% of the loan amount

Minimum Fee - INR 10,000

Maximum Fee - INR 30,000

NIL for Government Employees
HDFC LimitedSalaried - 0.50% of the loan amount or INR 3,000, whichever is higher

Self-employed Professionals - Upto 0.50% of the loan amount or INR 3,000, whichever is greater

Self-employed Non-professionals - Upto 1.50% of the loan amount or INR 4,500, whichever is greater
ICICI BankSalaried - 0.25% of the loan amount or INR 10,000, whichever is greater

Self-employed - 0.50-1% of the loan amount
LIC Housing FinanceNIL
PNB Housing FinanceINR 10,000
Bank of Baroda Upto INR 50 Lakh - 0.25% of the loan amount, subject to a maximum of INR 15,000

Above INR 50 Lakh - 0.25% of the loan amount, subject to a maximum of INR 25,000
Axis BankUpto 1% of the loan amount, subject to a maximum of INR 10,000
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Note – Goods and Service tax will also apply to the processing fee amount.

Prepayment Norms of Home Loan Lenders

When buying a house, the focus remains much on the interest rate and one hardly bothers about home loan prepayment. Since a home loan can run for a maximum of 30 years, the scope for prepayment is immense. There’s always a possibility of you accumulating bulk savings or getting a lump sum bonus from your organization over the course of this loan. Whatever you get, you can use it to prepay your home loan either fully or partly.

There are no prepayment charges for floating rate home loans. Maybe a few could charge for people other than salaried. So, you need to check that with your home loan lender. Whereas, if you opt for a fixed loan, charges will apply. In case you do a part payment, you could think of reducing the length of the loan by paying the same EMI. The reduction in the loan length will ensure a further reduction in the interest payment.

How to Convert a Fixed Rate Home Loan into a Floating Rate Loan?

If you have a fixed rate home loan, it means an increased interest burden for you. You may have signed a fixed rate deal under the impression that the interest rate will remain the same throughout the loan tenure. But now, you must have realized your mistake with an increased EMI constituting more interest.

The interest rate for a fixed home loan is about 2-4% more than a floating loan. As a result, the overall cost goes up for borrowers paying a fixed loan. However, you can correct your mistake by converting your loan into a floating rate, which will decrease both your monthly installment amount and the overall interest outgo despite rate changes during the course of the loan.

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There are some charges for the same that you need to pay. Check out the conversion charges in the table below.

LendersConversion Charges
State Bank of India (SBI)INR 5,000
HDFC LimitedAs Applicable
ICICI Bank1.75% of the principal outstanding
LIC Housing Finance (LIC HFL)INR 10,000
Punjab National Bank (PNB)As Applicable
PNB Housing Finance (PNBHFL)0.50% of the principal outstanding
Axis Bank2% on the drawing power
Kotak Mahindra BankAs Applicable
YES BANK0.50% of the principal outstanding

Which Lender Should You Approach for a Balance Transfer?

If you want to lessen your debt burden, you could even go for a home loan balance transfer. With this, you could switch to another home loan lender at a lower interest rate. Even if the interest rate is lower than your existing rate by 0.25-1%, it could bring savings of around INR 2 lakh or even more.

But initiating a balance transfer will aid you more when you do in the initial years compared to when the loan has run more than half its lifetime. So, if you want to choose a home loan lender for a balance transfer, you can check the interest rate of the top lenders that we have shown above. See which offers you the lowest in your case.

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  • Home Loan Interest Rates April 2021
    Axis Bank6.90% - 8.55%
    Bank of Baroda6.75% - 8.25%
    Citibank6.65% - 7.40%
    HDFC6.70% - 8.00%
    ICICI Bank6.70% - 8.05%
    Indiabulls Housing Finance Limited8.65%
    Kotak Bank6.65% - 7.30%
    LIC Housing6.90% - 7.90%
    Piramal Capital & Housing Finance9.65%
    PNB Housing Finance7.35% - 9.05%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI6.95% - 7.35%
    Tata Capital6.90% - 8.75%