Best Home Loan Interest Rate of all Banks 2022

Top Home Loan Interest Rate of all Banks 2022

Compare the lowest home loan interest rates starting from 6.40% p.a. All Banks Top Home Loan Interest Rate 2022 and Apply for Best Home Loan. Get a complete list of current home loan interest rates in India from all major banks and financial institutions.

• Home loan interest rates for all banks updated on 27 March 2022
• All HDFC Home Loans are at the discretion of HDFC Limited.

As part of the upcoming festive season in the country, major banks are offering special home loan offers to attract customers to take home loans. State Bank of India is offering attractive interest rates starting at 6.90% p.a. For home loans up to Rs.30 lakh and 7.00% p.a. Rs. For home loans above 30 lakhs. Those who apply through the bank’s Yono mobile application get an additional interest rate concession of 5 basis points.

Applicants in 8 metro cities of India will get an interest rate concession of 20 basis points for home loans up to Rs 3 crore. In the rest of the country, it will be applicable on home loans between Rs 30 lakh and Rs 2 crore. For home loans above Rs 75 lakh, interest rate concession of 25 basis points will be given. All interest rate concessions are also linked to applicants’ credit scores.

HDFC Limited has announced a blockbuster festive offer for home loans. As part of the campaign, home loans can be availed at interest rates starting from 6.70% per annum. EMIs start from just Rs 646 per lakh for loans up to 30 years. Under this campaign, the processing fee for loans will be limited to Rs 3,000 (plus tax) for employed persons and Rs 5,000 (plus tax) for self-employed persons. All HDFC Home Loans are at the discretion of HDFC Limited. Terms and conditions apply.

Bank of Baroda has cut the repo rate linked to the external benchmark by 15 basis points. Home loan rates have been reduced from 6.50% to 6.50%. PNB Housing Finance, Bank of India and Central Bank are now offering home loans at low interest rates. These home loans start at 6.75% per annum. And LIC Housing Finance offers home loans starting at 6.90% p.a. Now, there are many housing finance companies in India that offer home loans as low as 8.00% per annum.

How to Calculate Interest on Home Loan?

Generally, home loans are long-term loans and it is important to first ascertain your overall interest liability towards the loan. You can calculate it using one of the two methods listed below:

EMI Calculator: You can calculate the Home Loan interest amount applicable on your home loan only by using the Home Loan EMI Calculator. You have to fill the given fields on the calculator with the following details –

• Home loan amount
• Loan repayment period
• Rate of interest

Once the details are filled, you can click on the ‘Calculate’ button to get the detailed details of your loan including the amount due for Home Loan interest.
EMI Calculator Formula: Alternatively, you can also use the following formula to calculate your EMI liability for your home loan-
EMI = [P x r x (1+r)^n]/[(1+r)^n-1]

Where, P is the principal, r is the interest rate, and n is the number of installments or loan periods in months.

Related: How To Get A Best Loan To Buy A Business In 4 Steps

How to Calculate the Effective Interest Rate?

The interest rate applicable on a home loan has two components, the base rate and the markup rate. The combination of the two is what you will pay on the loan. Let us explore these components to understand you better.

 

Base Rate: This is the bank’s standard lending rate, which applies to all retail loans. This rate is subject to frequent changes based on many inputs.
Markup: This component of a small percentage is added to the base rate to arrive at the EIR (Effective Home Loan Interest Rate) for a particular type of home loan and varies from one type to another.

Effective Interest Rate (EIR) = Base Rate + Markup

From April 2016, the Reserve Bank of India (RBI) has mandated a new method for calculating the lending rate to replace the base rate system. The Fund’s Marginal Cost Based Lending Rate (MCLR) aims to bring greater accountability and flexibility in the way banks and financial institutions in India publish rates. RBI has ordered banks to fix interest rates after studying the risk factors associated with lending to borrowers. It takes into account various factors like repo rate, deposits etc. This MCLR based calculation is slightly lower than the previous base rate.

Types of Interest Rates in Home Loan

There are mainly two types of home loan interest rates charged by most banks.

1. Fixed Rate of Interest:

In this system of calculation, the rate remains constant even during the loan period. There will be no change in Home Loan interest charges as the rate remains constant. Depending on the offer, you may be allowed to switch to a floating rate system after completing a certain period in the loan tenure.

Advantage: Since the rate remains fixed, you know how much interest you are paying upfront. Your loan will be protected from frequent fluctuations and will save money in the long run if lending rates rise.
Disadvantage: If standard lending rates fall, you will not benefit as the interest component remains constant.

2. Provisional Interest Rate:

Interest charges on your home loan are subject to the current highest lending rates of the bank. The rate is linked to the bank’s latest published rate which in turn depends on several factors such as RBI’s monetary policy and revisions in lending rates, bank’s response to revisions etc.

Advantage: The biggest advantage of opting for floating rate is that you get the benefit of being billed based on the latest rate. If rates fall, you save on interest charges.
Disadvantage: In a rare scenario, if standard rates are increased, the loan suffers from being billed at a higher rate.

Note: However, floating home loan interest rates are cheaper than fixed home loan interest rates on the first front.

Related: How To Get A Best Loan To Buy A Business In 4 Steps

Types of Home Loan Interest Rates

Based on the interest rate, there are three types of home loans, fixed-rate, floating rate and hybrid.

1. Fixed Rate Loan – The fixed interest rate remains the same throughout the loan tenure, so the home loan EMI remains constant. It is better to apply for a home loan at a fixed interest rate when the current home loan interest rate is very low and an upward trend is expected in the future.

2. Floating Rate Loan – Floating rate of interest, also known as variable rate of interest, is subject to prevailing market lending rates; And thus, they may change during the loan tenure. The home loan EMI will increase or decrease depending on the interest rate movement.

3. Hybrid Loans – Hybrid rate home loans are a combination of fixed rate and floating rate home loans. They will initially have a fixed interest rate for a fixed period, after which it will change to a floating rate of interest. Such housing loans are best suited for people who have secured a low fixed rate loan and plan to prepay or foreclose it before the floating rate kicks in.

Factors Determining Your Home Loan Interest Rate

Since home loans are generally high-ticket size loans, banks and HFCs conduct strict checks on the borrower’s credit history, repayment capacity, income along with the property to be purchased. For borrowers seeking a home loan, they should be aware of the factors that lenders look at while processing a home loan application and have a keen awareness of their own eligibility.

It’s important to note that even low-interest rates usually come with strict eligibility requirements. Here are the factors lenders consider to determine your home loan eligibility and the interest rate to be offered:

Credit Score: Your credit score is a numerical representation of your credit history. Those who have paid their EMIs and credit card bills in full, on time and have not relied heavily on credit in the past are likely to have a good credit score. If your credit score from CIBIL and other bureaus is 750 and above, lenders will consider you favorable for a home loan.

Also, banks and HFCs are using the credit score of home loan applicants to decide their home loan interest rates. As a high credit score reflects responsible credit behavior and financial discipline, many banks and HFCs offer home loans to applicants with high credit scores at low interest rates. Those with no or low credit scores can improve their credit scores by getting a free lifetime Paisabarzaar Step UP Credit Card.

Income and Employment: While assessing your home loan eligibility, lenders also consider your income, type of employment and profile of your employer. Home loan applicants working with government or PSUs or large and/or reputed private sector organizations are generally preferred by lenders due to their high job/income certainty. Therefore, lenders offer lower home interest rates to such applicants. On the other hand, home loan applicants with irregular or insufficient income may find it difficult to get a home loan at a low interest rate.

Loan Amount: The loan amount you want to take can also influence the rate you get for a housing loan. Rs. Home Loans up to 30 lakh usually has a lower interest rate compared to higher amount home loans. To get a lower rate of interest on your home loan, one should try to make the maximum down-payment possible. This will not only reduce the overall loan burden but can also help them get a lower rate of interest on their loan.

Type of Home Loan: Home loan interest rates also vary depending on the type of home loan. Regular home loans have standard rates while their counterparts such as plot loans or NRI home loans usually have higher interest rates.

Interest rate concessions for women home loan borrowers: Some lenders offer home loan interest rate concessions to women borrowers, typically 0.05%. Hence, it is advised that married couples should consider taking a joint home loan and make the wife the primary applicant if they can get a lower rate of interest. Getting a joint home loan will also increase your home loan eligibility as well as home loan tax benefits.

Type of Interest Rate: The interest rate you choose for your home loan will determine the rate at which you will pay your lender. In case of fixed rate home loan, the EMI remains the same for the entire loan period. A floating rate, on the other hand, varies according to changes in its lending rate such as the Repo Linked Lending Rate (RLLR). Lenders generally charge higher interest rates on home loans offered at fixed interest rates because of the higher interest rate risk associated with fixed-rate home loans.

Home Loan Interest Rate FAQs

1. What is the home loan interest rate?

A home loan interest rate is a percentage of the principal amount charged by the lender to the borrower for using the principal amount. The interest rate charged by banks and non-financial institutions determines the cost of your home loan. So, when you pay your home loan EMI (Equal Monthly Installment), the interest rate charged determines how much you have to pay your lender against your loan every month. Interest rates are usually linked to the repo rate and may vary from lender to lender.

2. Which bank has the lowest home loan interest rate?

Although the interest rates offered by banks may increase or decrease at the discretion of the banks, currently Citibank is offering the lowest home loan interest rate of 6.65% p.a. to its customers. However, note that this rate is applicable only on home loans for women applicants.

3. How to get the lowest home loan rates in India?

Home loan interest rates are at a 15-year low, so almost all banks are offering lower interest rates on home loans compared to what they were offering in the previous fiscal. However, to get the lowest home loan interest rates, compare the rates offered by lenders. Always use a home loan EMI calculator when comparing rates; It will help you estimate how much you will have to pay against your loan each month.

4. How to reduce home loan interest?

Reducing your home loan interest will help reduce the EMI burden from your shoulders. There are several ways that you can consider that will help reduce your loan interest.

Opt for a short tenure – For a long term loan, even though the EMI is low, the overall cost of the loan goes up drastically as you are paying interest for a long time. So, choose a short tenure as the interest amount will reduce a lot with time. Use a home loan EMI calculator when comparing long-term and short-term home loans.

Make regular prepayments – During the first few years of your home loan, you will pay more towards the interest charged and less towards the principal. Thus, if you prepay a housing loan, you will eventually bring down your outstanding principal, reducing the interest in the process. However, some banks charge a certain percentage for loan prepayment, especially on fixed rate loans.

Get a balance transfer – Opt for a balance transfer only if you feel that your current lender is charging higher interest rates than other lenders. Most banks offer a home loan Interest balance transfer facility, through which you can shift your loan account to a related bank that offers lower rates of interest.

5. How is home loan risk weightage linked to LTV ratio?

The LTV or loan-to-value ratio is the percentage of the property’s value that the bank will finance while the rest is financed by the home buyer. Most banks lend up to 90% of the property value. This percentage may vary depending on the loan amount. Lenders typically use LTV to determine how risky a loan is and whether they will approve or deny it.

For instance, with an LTV ratio of less than 80% Rs. For loans up to 30 lakhs, the risk weightage is 35%. Similarly, for the same amount, if the LTV ratio is between 80% and 90%, the risk weight is 50%. Rs. For home loans above 75 lakhs and LTV ratio above 75 percent, the risk weightage is 50%.

6. Which bank has the lowest interest rate for self-employed?

Union Bank of India, Bank of India and SBI are banks that offer attractive interest rates for self-employed professionals and non-professionals, with rates starting from 7.90% p.a, 6.85% p.a. and 8.05% p.a. respectively..

7. How can I check the total interest payment for my housing loan?

Use a home loan EMI calculator to check your total interest payment against your loan. Just enter the loan amount, tenure and interest rate. Upon calculation, you will be able to not only calculate your EMI, but also a detailed breakdown of your repayment schedule through the amortization table. Through an amortization table that represents your repayment schedule, you can check how much interest you have paid against your loan.