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How to Get a Home Loan at a Lower Rate of Interest?

Highlights

  • Planning to go for a home loan at lower interest rates?
  • It will depend on your credit score, employment status, etc

If you see the interest rate of different loans, you will find the rate much lower in a home loan compared to other loans. Thanks to constant repo rate cuts made by the Reserve Bank of India (RBI), home loan rates have fallen to 7%-8% per annum now. But that does not mean you should not do homework on the interest rate. Since a home loan is a long term loan that can continue for a maximum of 30 years, you should ensure the home loan interest rate offered to you is the lowest so that you can reduce your liability. A difference of even of 0.50% in terms of home loan interest rate can bring a difference of 1 lakh or more in the overall repayment. You can now gauge how important a rate is to a seamless home loan repayment journey. But how will you get a home loan at a lower rate of interest? Read on to know the same.

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Ways by Which You Can Get a Home Loan at a Lower Interest Rate

Lower home loan rates are possible when you have a good credit score and other factors going your way. Let’s check it out here.

A Good Credit Score

A credit score may not hold importance as far as getting approval for a home loan is concerned. Yes, for secured loans like home loans, a credit score is not a criterion to give the loan or not, much unlike personal loans, credit cards where the credit score decides whether or not you will get them. But it does play a role as far as home loan interest rates are concerned. Ideally, a credit score of 750 and above is considered a good one. But different lenders can have a different credit score criterion to give the lowest home loan interest rate. While some can give it beyond 750, some can give it on a credit score of 700-750. Although there are mainly four credit bureaus offering credit scores to individuals in India, it’s the CIBIL score that most lenders look at before deciding the interest rate. Let’s check out the special home loan interest rate based on credit score.

How to Get a Good Credit Score?

This will depend on your repayment history; how you have managed or been managing your debts, the kind of credit utilization ratio you have, how many credit accounts you have, etc. In case you are paying any debt, ensure you pay the monthly obligation on time. The payment record holds as much as 35% weightage to your credit score. If you are using a credit card, ensure the credit utilization remains 30% of the credit limit offered.

Women Applicants

Lenders provide lower home loan interest rates to women applicants. If you are a woman and looking for a home loan, the interest rate will be lower than male counterparts for different loan amounts. Even if you are a male applicant, you can make any female members of your family, such as your spouse, as the co-owner of the property. Lenders allow such a thing on a home loan. Let’s check out the difference in home loan interest rates for female and male borrowers across different lenders.

Home Loan Interest Rate for Female and Male Applicants at Different Lenders

LendersFemale BorrowersMale Borrowers
State Bank of India (SBI)
  • Loan upto INR 30 Lakh - 6.95%-7.20%
  • Loan Above INR 30 Lakh-75 Lakh - 7.20%-7.45%
  • Loan Above INR 75 Lakh - 7.30%-7.55%
  • Loan upto INR 30 Lakh - 7.00%-7.25%
  • Loan Above INR 30 Lakh-75 Lakh - 7.25%-7.50%
  • Loan Above INR 75 Lakh - 7.35%-7.60%
HDFC Limited
  • Loan upto INR 30 Lakh - 6.95%-7.60%
  • Loan Above INR 30 Lakh-75 Lakh - 7.20%-7.85%
  • Loan Above INR 75 Lakh - 7.30%-7.95%
  • Loan upto INR 30 Lakh - 7.00%-7.65%
  • Loan Above INR 30 Lakh-75 Lakh - 7.25%-7.90%
  • Loan Above INR 75 Lakh - 7.35%-8.00%
Bank of India
  • CIBIL Score between 725 and 759 - 7.00%-7.10%
  • CIBIL Score between 625 and 724 - 7.10%-7.70%
  • CIBIL Score of - 1 and O - 7.00%-7.10%
  • CIBIL Score between 725 and 759 - 7.05%-7.15%
  • CIBIL Score between 625 and 724 - 7.15%-7.80%
  • CIBIL Score of - 1 and O - 7.05%-7.15%
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Other lenders also offer concessional rates to women borrowers.

A Salaried? Expect Lower Home Loan Rates than Your Self-employed Counterparts

As salaried professionals are expected to have a regular flow of income compared to self-employed whose income could depend on seasons and market forces to a great extent, lenders keep a higher rate for the latter than the former. The table below shows the rates for both salaried and self-employed at several lenders.

LendersSalariedSelf-employed
State Bank of India (SBI)6.95% - 7.45%7.10%-7.60%
HDFC Limited6.90% - 7.55%7.10%-8.00%
ICICI Bank6.90% - 7.95%7.70%-8.55%
LIC Housing Finance (LIC HFL)6.90% - 7.80%7.50%-8.70%
PNB Housing Finance (PNBHFL)7.90% - 9.00%8.85%-9.45%

Pay More Down Payment

Home loans are not financed fully, you need to make some down payment from your end. Loans upto INR 30 lakh, above INR 30 lakh-75 lakh and above INR 75 lakh can be financed at upto 90%, 80% and 75% of the property cost, respectively. So, you are left with the liability to pay around 10%-25% of the property cost to the seller. In case you pay more than the required down payment amount, it could translate into lower home loan interest rates.

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  • Home Loan Interest Rates October 2020
    Axis Bank7.75% - 8.55%
    Bank of Baroda7.00% - 8.40%
    Citibank8.20%
    HDFC6.90% - 7.65%
    ICICI Bank6.90% - 8.05%
    Indiabulls Housing Finance Limited8.80% - 11.05%
    Kotak Bank7.20% - 9.30%
    LIC Housing6.90% - 7.90%
    Piramal Capital & Housing Finance9.00% - 9.10%
    PNB Housing Finance7.90% - 9.20%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI6.95% - 7.60%
    Tata Capital9.20% - 9.35%