Home Loan Interest Rates

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Home Loan Interest Rates

About Home Loan Interest Rates

home loan interest rates

Home Loan Interest Rates are the main factors to consider before availing of the housing loan. When people secure the lowest Home Loan Interest Rates, it reduces the overall cost of housing loans and minimizes monthly payments. Homebuyers should consider various factors, like interest rates, fees, and terms, to procure the best home loan.

Applicant verification is done by gathering relevant information from the applicant and checking if he/she meets their eligibility criteria for a home loan.

Home Loan Interest Rates

Bank Interest Rate Processing Fee
HDFC Bank 6.95% onwards (Linked to RLLR) Up to 0.5% of the loan amount or Rs. 3,000, whichever is higher
Private Bank 8.65% (Linked to RLLR) 0.50% – 2.00% of the loan amount or Rs. 1,500 (Rs. 2,000 for Mumbai, Delhi & Bangalore), whichever is higher, goods and service taxes are also applicable.
Axis Bank 7.45% onwards (Linked to RLLR) Up to 1% of the loan amount (Min. Rs. 10,000)
Bank of Baroda 7.25% – 8.25% (Linked to RLLR) Up to Rs. 50 lakh: 0.50% of loan amount (Min. Rs. 8,500 & Max. Rs.15,000)
    Above Rs. 50 lakh: 0.25% of loan amount (Min. Rs. 8,500 & Max. Rs. 25,000)
Canara Bank 6.90% onwards (Linked to RLLR) 0.50% of the loan amount
Central Bank of India 6.85% onwards (Linked to RLLR) 0.50 % of the loan amount
DHFL 8.75% onwards (Linked to RLLR) For Salaried/Self Employed Professional – 0.5% of the amount (Min. Rs. 2,500)
    Self Employed Non-Professional – Net PAT: 0.5%, Others: 1.5%
Federal Bank 7.90% – 8.09%  0.50% of the loan amount (Min. Rs. 3,000; Max. Rs. 7,500) 
YES Bank 8.85% -13% (depending on the type of loan you choose) 2% of the loan amount or Rs. 10,000, whichever is higher
PNB Housing Finance 8.60% – 9.45% (Linked to PNBHFR) Up to 0.25% (Max. Rs. 15,000)
State Bank of India 6.95% onwards (Linked to RLLR) 0.35%  of loan amount (Min. Rs. 2,000;  Max. Rs. 10,000)
IDBI Bank 7.40% – 8.40%   0.50% of the loan amount (minimum ₹ 2,500 and maximum ₹ 5,000)
Bajaj Finserv 7.5% onwards (Linked to BFL FRR) For salaried individuals: Up to 0.80%
    For self-employed individuals: Up to 1.20%
Bank of India 6.85% – 7.75%  0.25 % of loan amount (Min. Rs. 1,000; Max. Rs. 20,000)
IIFL 8.70% onwards (Linked to PLR) Up to 1.75% of the loan amount
Indiabulls Housing Finance 8.99% – 9.75%  Up to 1% of the loan amount
India Shelter Finance Corp. Ltd. 13.00% onwards 2% – 3% of the loan amount 
Indian Overseas Bank 7.05% onwards (Linked to RLLR) Up to 0.50% of the loan amount
Kotak Mahindra Bank 7.35% onwards (Linked to MCLR) Up to 0.5% of the loan amount 
LIC Housing Finance 8.55% onwards (Linked to PLR) Rs. 10,000 for loan up to 50 Lakhs and Rs. 15,000 for loan above 50 Lakhs and up to 3 Crores.
Punjab National Bank 7.10% onwards (Linked to RLLR) 0.35% of the amount 
Standard Chartered Bank 7.99% onwards Up to 1% of the loan amount
Tata Capital 8.50% onwards (Linked to RPLR) 0.5% of the loan amount

Tips for availing of best home loan interest rates

  • Determine the loan type: Home Loan Interest Rates is the main consideration while comparing the Home Loan Interest Rates. Fixed and adjustable rates are the two various categories of the interest rate. People have to consider the rate according to their requirements, but the fixed rate is the best option to choose.
  • Credit Rating and Financially Stability: Various lending institutions assign the interest rate on the basis of the credit score of the consumers. Consumers who have a high credit rating score will get low housing loan interest rates. Find and compare interest rates through online tools of comparison, which permit borrowers to compare rates of different financial institutions.
  • Fees and Charges: Various lending institutions charge fees including settlement fees, appraisal fees, broker fees and loan processing fees. Compare the fees of different lenders before availing of the housing loan. Select the loan that provides the lowest Home Loan Interest Rates.
  • Provision of paperwork: The loan provider needs to be provided with all the home loan documents that are demanded from the applicant, this plays a major role in the amount calculation of the property to be leveraged.

Floating Rate Loans or Fixed Rate Loans: Which are more Popular?

Many people are often confused about floating-rate loans and fixed interest rate loans. A floating interest rate means the interest rates may change based on the banks and these interest rates may fluctuate. But in Fixed interest rate loans, it may or may not change the interest rates. Majorly the interest rates are not changed but in some conditions, they can change.

This is one of the main differences between floating-rate loans and fixed-rate loans. In terms of banks, they are more comfortable in choosing the floating interest rate loans because in these floating interest rate loans you can change the interest rates based on the economy.

From the borrower’s perspective if the loan tenure is short then choosing the floating interest rates loans is useful as it has low interest rates. If the tenure time is long then choosing Fixed interest rates is useful as in floating interest rates even though interest rates are low, it may change based on the economy.

How is Home Loan Interest Rate Calculated?

The Home Loan Interest rate is calculated based on the Home Loan Amount you have taken. In interest rates the monthly reducing, annual reducing and daily reducing are the ways for banks to charge interest rates. For Home Loans reducing balance is used. Some also use other methods. In a daily method, you can reduce the principal with EMIs.

In prepayment, the principal is reduced. So if you pay EMI on 10 and prepayment on 15 then it will reduce immediately. Loan Amount, Interest rates and loan tenure play a major role in calculating these home loans.PMT Formula in Excel is used by many banks for calculating interest rates.

You should need three terms like interest rates, loan period and loan amount. For the rate of interest, it is monthly paid EMIs. So you can divide interest rates for 12 if it is 10 and the tenure time is 20 and 20*12=240. So the amount is 48251. You can also use the formula ((1+R^n)/(1-(1+R)^n). Here P is the principal and R is the interest rates and n is the instalments.

What are MCLR and RLLR?

MCLR is an internal benchmark that can know about the interest rate of home loans. MCLR is known as Marginal Cost of Funds based Lending Rate. This is a rate for the customers of home loans. These are mainly used by financial institutions for loans. This MCLR is calculated internally by many banks. RLLR Is an external benchmark. This RLLR Is used for the calculation of repo rates through interest rates and in this RLLR can reduce by 35 base points. Repo rates are very important in RLLR. 

List of Top Best Banks for Housing Loans in India 

The best banks for home loans are

  • State Bank of India
  • HDFC Bank
  • Private Bank
  • Bank of Baroda
  • Punjab National Bank
  • LIC Housing Finance
  • Canara Bank
  • Union Bank
  • Axis Bank

Factors that affect Home Loan Interest Rates

Many factors affect Home Loan Interest rates. Some of them are Credit score, Property location, Interest types, Loan tenure time. MCLR rates also play a major role in choosing home loans. The type of interest plays a major role. Suppose if your interest type is floating or fixed. Based on this the interest rates are decided. Credit score also plays a major role. Generally, credit scores above 750 are useful and these credit scores are useful for reducing interest rates. These are some of the factors that affect the home loan interest rates.

Different methods for Housing Loan Interest rates Calculation

There are three methods to calculate the Housing Loan Interest rates and these three methods are daily recurring, monthly recurring and annually recurring. These are some of the different methods of calculating. But in Home Loans mostly daily recurring is used. In this the interest rate is calculated by using an Excel formula and then after that, you can calculate by using a simple mathematical formula.

In this way, you can calculate daily recurring. The other two methods are vast so many banks prefer this method only. You can also use flat rate and reducing balance methods for calculating Interest rates. 

Example of Flat Rate and Reducing Balance Method of Interest Calculation

In the Flat rate interest calculation, the interest rate which is to pay is fixed. In this, the interest rate amount is based on the loan amount and its tenure. So this method is used for personal loans and vehicle loans. You can use the formula :

Loan amount*No. Of years*Interest rates/number of instalments

In the Reducing Balance method, the interest rates paid are monthly and it is not fixed. These interest rates are based on a repayment only. The formula for this Reducing Balance Method is:

Interest rates per instalment* Remaining Loan Amount

Home Loan Details – Important Points to know

  • Home Loans can be avail in banks. Home Loan has various interest rates and these interest rates have various factors. 
  • A credit score is one of the most important things in availing of home loans. Credit scores above 750 are useful for low interest rates. 
  • For fixed interest loans the interest rates are high and for Floating interest rates loans the interest rates are higher. 
  • The loan amount, type of loan, Employment and Loan Tenure are important for Home Loans.
  • Home Loans have high repayment tenure of around 20-30 years.
  • Under section 80C you can avail of tax benefits on these Home Loans.

Home Loan Comparison on Popular Loan Schemes

Although all banks and HFCs in India offer a variety of home loan options, some newer programmes, such as the Pradhan Mantri Awas Yojana and the DDA, are gaining traction in India due to their unique features and low interest rates. Many common schemes for women loan borrowers, businessmen, and established bank customers are offered by banks such as SBI, Axis Bank, Citibank, Private Bank, PNB, and HDFC. The table below summarises some of the most successful home loan programmes:

Bank Scheme Features
SBI For Women Borrowers The loan is offered at a concessional rate starting @ 6.70%.
  Maxgain A home loan with overdraft facility @ 6.95%
Axis Bank Home Loan Top Up Loan to get the additional loan amount. The interest rate of top-up loan starts @ 6.90%
  Shubh Aarambh Home Loan Avail 12 EMI waiver offer at 7.75%
HDFC HDFC Reach A home loan with less documentation starting @ 8.75%
  HDFC Trufixed Home Loan Home loan interest rates are fixed for a certain period of the loan tenure starting at 7.40%. As and when the fixed interest rate period ends, the loan is then continued as per the adjustable rates.
Bank of Baroda Pre-approved Home Loan Loan pre-approved by the bank @ 8.65% before the property is purchased by the applicant with a validity of 4 months
Citibank Home Credit Loan A home loan with overdraft scheme @ 6.85%
  Citibank T-Bill Home Loan The innovative scheme in which floating rate home loans are benchmarked to 91 days Govt. T-Bill rate, thus making them completely transparent

Home Loan Eligibility Calculator

Individuals’ ability to repay a home loan is mainly determined by their income and repayment capacity (s). Other factors that decide home loan eligibility include age, financial situation, credit history, credit score, and other financial obligations, among others.

Criteria for Getting a Home Loan

  • Current Age and Remaining Working Years: The applicant’s age is a significant factor in deciding home loan eligibility. In most cases, the overall loan period is 30 years.
  • Salaried individuals must be between the ages of 21 and 65.
  • Individuals who are self-employed must be between the ages of 21 and 65.
  • Minimum Salary: $10,000 per month Minimum Salary: $10,000 per month Minimum Salary: $10,000 per month Minimum Salary: $10,000 per month Minimum Salary
    2 lac p.a. minimum company profits
  • 30 years is the maximum loan term.
  • Financial Situation: The applicant(s)’ current and potential income has a direct effect on the loan sum.
  • Credit History and Scores in the Past and Present: A good payment history is a plus.
  • Existing liabilities, such as a car loan or credit card debt, are examples of other financial obligations.

How to Calculate the Effective Interest Rate?

The Effective Interest Rate is the interest rate calculated for compounding over a period of time. Simply put, the effective annual interest rate (AAR) is the annual rate of interest that an individual can receive (or pay) after compounding.

EAR can be used to calculate the amount of interest that will be paid on a loan or other debt, as well as the earnings from a fixed investment certificate (GIC) or a savings account.

The average annual interest rate (EIR), annual equal rate (AER), or effective rate is another name for the effective annual interest rate (EIR). As compared to the Annual Percentage Rate (APR), which is dependent on basic interest, this is a significant difference.

The EAR formula is given below:

EAR = (1+ i/n)n1


  • i = Stated annual interest rate
  • n = Number of compounding periods

Compare Best Home Loan Interest Rates of All Banks in India

Bank Home Loan Rate Benchmark Type Processing Fee
SBI Home Loan Interest Rates 6.70% RLLR Min ₹ 10,000
HDFC Home Loan Interest Rates 6.75% PLR 0.50%, Min ₹ 3,000, Max ₹ 10,000
Citibank Home Loan Interest Rates 6.65% TBLR NIL
Bank of Baroda Home Loan Interest Rates 6.75% RLLR Min ₹ 7,500
Private Bank Home Loan Interest Rates 6.75% RLLR 0.25% , Min ₹ 3,000, Max ₹ 5,000
Axis Bank 6.70% RLLR 0.20% , Min ₹ 10,000, Max ₹ 25,000
PNB Housing Finance 7.35% PLR 0.50%, Min ₹ 10,000
LIC Housing Finance 6.90% PLR Min
Bajaj Home Finance 6.75% PLR 0.35%
Sundaram Home Finance 6.90% PLR Max ₹ 3,000
Kotak Bank 6.65% RLLR Max ₹ 10,000
  8.95% 1 Year MCLR 1.00%, Max ₹ 15,000
Syndicate Bank 6.95% RLLR 0.13% , Min ₹ 500, Max ₹ 5,000
IDFC First Bank 8.50% RLLR Min ₹ 5,000, Max ₹ 5,000
Bank of India 6.95% RLLR 0.25% , Min ₹ 1,500, Max ₹ 20,000
Allahabad Bank 8.25% RLLR 0.40% , Max ₹ 50,000

Which Bank is Giving the Lowest Interest Rate on Home Loan?

The current lowest home loan rate is 6.65 per cent, which is a 0 per cent reduction from the previous rate of 6.65 per cent. On January 1, 1970, the lowest home loan interest rates were recorded. Citibank and Kotak Bank offer the highest housing loan rates, beginning at 6.65 per cent, as of May 12, 2021. If you are a salaried or female creditor purchasing a home for less than 30 lakh, you might be eligible for the lowest rates.

EMI Calculator

By that the interest portion of your loan, you will save a significant amount of money. You can manage to close your home loan fast and efficiently if you have the necessary funds by using a home loan repayment calculator and remembering your home loan foreclosure costs.

Home Loan Rates for Loan of ₹ 30 Lakh and below as of 12 May 2021

The interest rate on a home loan of less than 30 lakh rupees is slightly lower than the interest rate on a loan of more than 30 lakh rupees. Lenders are most likely to offer cheaper rates to customers who choose to take out smaller loans. The below are the interest rates offered by various banks for home loans of less than 30 lakh:-

Bank Name Interest Rate Tenure
Kotak Bank 6.65% 20 years
Axis Bank 6.70% 30 years
SBI 6.70% 30 years
HSBC Bank 6.74% 25 years
Private Bank 6.75% 30 years

Home Loan Rates for Government Employees as of 12 May 2021

If a creditor is a federal official who wishes to take out a mortgage loan, he or she will have an advantage over the general public because they will be charged a reduced interest rate.

Bank Name Interest Rate Benchmark
Citibank 6.65% TBLR
Kotak Bank 6.65% RLLR
Axis Bank 6.70% RLLR
SBI 6.70% RLLR
HSBC Bank 6.74% RLLR

Current Rates on Housing Loan for Women Borrowers

To encourage women to become financially independent, most lenders give exclusive interest rate discounts to women borrowers. Women will get a home loan for as little as 6.70 per cent.

Bank Name Interest Rate Tenure
SBI 6.70% 30 years
HDFC 6.75% 30 years
Corporation Bank 6.80% 30 years
Canara Bank 6.90% 30 years
Bank of Maharashtra 7.00% 30 years

How to Calculate Housing Loan Interest Rate?   

Before applying for a home loan, you can calculate the EMI and interest rate. There are two ways to figure out how much a home loan would cost you:

EMI Tracker: You can use an EMI calculator to figure out how many EMI you can handle safely. You must enter the following data to measure the EMI:

  • The interest rate for a home loan
  • Term of Loan
  • You may also alter the data to calculate the EMI for a variety of quantities and tenures.

The formula for EMI Calculation: Another method for calculating interest and EMI on a home loan is to use a statistical algorithm based on the formula P x R x (1+R)^N]/[(1+R)^ (N-1). The principal balance is P, the interest rate is r, and the tenure is n. While the same formula can be used to perform a mathematical equation, using an online calculator is preferable because it provides accurate results in a short amount of time. These calculators can be found on a variety of websites.

Factors Affecting Home Loan Interest Rates:

There are certain factors that either increase or decrease the home loan interest rate in India significantly. These factors are as follows:

  • Income – First and foremost, your income is the most important factor that determines your interest rate. If you have a fixed, high income then the banks will be willing to lend you a loan at low-interest rates and be lenient with the repayment. 
  • Credit score: Your credit score greatly impacts interest rates on home loans. A credit score is what describes your repayment history. A higher CIBIL score will enable you to avail of an easy home loan but a lower CIBIL score would attract a higher interest rate. 
  • Type of interest rate: Home loan rates of interest are broadly of two types – fixed and floating rates. In the case of fixed-rate home loans, EMIs remain constant for the entire loan period, despite changes in the interest rates with time. Floating rates, on the other hand, change as per change in its lending rate (Repo Linked Lending Rate). The interest rates for a fixed rate are usually 1% to 2.5% higher than for a floating rate.
  • Loan amount: The loan amount you wish to borrow also affects the rate of your housing loan. Interest rates are higher for loans above Rs 30 lakh.
  • Employment Type: Self-employed applicants usually attract a higher rate of interest due to the instability of the market, whereas the salaried applicants can avail of home loans at lower rates.
  • Location of the property – Another thing that matters is the location of the property you desire to buy. If the property is in a prime location and is being bought through a trusted agency then your interest rates can be lowered.
  • Loan Tenure – Lastly, the loan tenure affects the interest rates, a longer tenure brings a lower interest rate.

An Effective interest rate (EIR) consists of two components:

  1. The base rate, which remains fixed.
  2. The mark-up rate, which is a small percentage of interest added to the base rate. It varies according to the property. 

How to Get Lowest Home Loan Rates in India?

In the Indian market, a home loan is a common loan since many people can use it to realise their housing dreams. In addition, the success of this loan has resulted in a plethora of home loan lenders entering the market. As a result, deciding on the most affordable home loan with the lowest interest rate is a difficult challenge. However, if you follow the steps outlined below, you can get the best home loan rate in India. :

  • Maintain a strong credit score: A credit score is one of the most important things to consider when applying for a home loan because it assures the lender of the borrower’s ability to repay the loan. As a result, having a decent credit score will assist you in obtaining loans with the most favourable terms and conditions.
  • Joint home loans are the safest home loans for people who are afraid of being responsible for a home loan. Taking out a home loan jointly not only distributes the cost of the loan but also lets you get a lower interest rate. This is due to the fact that a joint home loan entails the creditworthiness of several individuals, resulting in a greater likelihood of loan repayment.
  • Choose a home loan balance transfer: As is well known, home loan interest rates do not apply to all lenders; rather, they differ from one lender to the next. There’s also always a lender with the best home loan rate. If you have a home loan with a lender that charges a high interest rate, a home loan balance transfer might be the best option for you. As a result, even current home loan borrowers will get a home loan at the lowest possible cost.
  • Home loan down payment: In order to keep the home loan operation running smoothly, home loan lenders are eager to recoup the borrowed funds from the borrower. Making a downpayment on a home loan, on the other hand, is beneficial not only to the home loan lender but also to the borrower. This is due to the fact that a downpayment assures the lender of the borrower’s creditworthiness. As a result, a lower home loan interest rate can be obtained.

How to Reduce Home Loan Interest Rate Burden?

A home loan is a significant commitment that must be met in order to keep one’s creditworthiness in the financial markets. Home loan debt, on the other hand, can still be reduced. This can be accomplished by taking the steps outlined below:

  • Home loans are transferred to lenders with the lowest home loan interest rate.
  • Increasing the size of the mortgage EMIs will assist in the early repayment of a home loan.
  • Home loan prepayment or partial prepayment will help you save money on interest and reduce your EMI burden.
  • Making down payments on a home loan will also ease the pressure, as the principal sum is reduced, and the EMI is reduced.
  • Choosing a longer loan term allows for a more even distribution of EMIs. As a result, the monthly EMI pressure on a home loan may be changed.

Top Home Loans at Fixed Rate

  • HDFC Bank provides rates ranging from 7.40 per cent to 8.20 per cent per annum (depending on the loan amount) that are fixed for two years only and then reset.
  • The fixed interest rate home loan offered by Axis Bank is 12.00 per cent per annum.

Top Home Loans at Floating Rate

Bank Name Floating Interest rate Benchmark Rates on
SBI – State Bank Of India 6.70% – 6.75% 8.15%
Private Bank 6.95% – 7.35% 8.75%
HDFC Ltd 6.75% – 6.80% 16.20%
LIC Housing 6.90% – 7.00% 14.60%

Types of Interest Rates

  1. Fixed interest rates
  2. Floating interest rates
  • Fixed-Rate Home Loan: The loan EMIs remain constant for the Fixed-rate home loans, which means that the rate applicable to the applicant at the time of loan disbursal will remain unchanged throughout the loan tenure, even if the interest rate decreases or increases with time. The rates are usually higher for a Fixed-rate home loan.

The advantage of a fixed home loan rate is that you can know explicitly how much EMI you have to pay, and if the lending rates increase your EMIs won’t be affected. However, the disadvantage is that if the lending rates decrease, you won’t be able to avail of its advantages.

  • Floating-Rate Home Loan: The EMI amount for these home loans alter with changes in the interest rates with time. It comprises of Index and Spread in which Index is the benchmark rate that alters with RBI’s policy changes and Spread remains constant as it is the additional charge that a bank adds to cover up the risk factor.

Again, the only disadvantage here is that if the lending rates increase, you will have to bear the brunt of the increased EMIs.

Fixed vs Floating Interest Rates:

Fixed Interest Rate Floating Interest Rate
Higher Interest Rate Lower Interest Rate
Not affected by financial market conditions Affected by changes in the financial market
Fixed EMIs EMIs change as per interest rate or MCLR
Budget planning possible Difficult to budget or manage financials
Sense of security Generates savings
Suitable for short/medium term (3-10 years) Suitable for long term (20-30 years)
Lesser risk Higher risk

It is always better to make a huge down payment. Down-payment is the payment you make initially, after which you pay the remaining amount in the form of Equated Monthly Installments (EMIs). The advantage of making a huge down-payment is that it reduces your EMIs and makes it easier for you to repay your loan for the remaining tenure.

it is the choice of the applicant where to apply for a home loan, a home loan EMI calculator might prove helpful to understand the terms offered by a bank or NBFC.

Types of Home Loans 

Banks and NBFCs in India provide different types of home loan options according to various needs. Here’s a list of the main types of housing loans availing in India:

  1. New Home Loans: These are offered to customers looking to purchase a new house or property for the first time.
  2. Home Renovation Loans: Home loans for renovation are offered to borrowers who wish to renovate/extend their existing house.
  3. Step-up Loans: This is when the borrower is given the liberty to pay a lower EMI amount during the earlier days of repayment which gradually increase as the tenure progresses.
  4. Bridge Loan: is a short-term housing financing that helps the borrowers to “bridge” the gap between their existing and new mortgages by allowing them to keep the equity of the current residence as a down payment for buying a new house, waiting for the sale of the old house.
  5. Interest Saver Loan: This allows the borrower to deposit his excess savings in a current account linked to his home loan account. While calculating the interest component, the bank deducts the balance in the current account from the borrower’s outstanding principal.
  6. Home Extension Loan: is a loan that can be availed to extend an already existing residential property by adding space or new rooms to it.
  7. Balance Transfer Home Loan: This can be used to transfer an individual’s home loan from one bank to another, looking for lower interest rates. 
  8. Home Purchase Loans: These are specifically provided to borrowers seeking to purchase a residential house or flat.
  9. Home Loan for Construction: This is offered to customers who are looking to construct a new house on an existing piece of land.
  10. Plot Loans: These are loans offered to customers looking to purchase a piece of land or plot for house construction.
  11. Home Loan Top Up: This is an add-on facility offered by most banks and NBFCs that allows existing customers to borrow a certain amount above and over the already existing home loan.

Some Basic Tips for A Home Loan

  1. Compare! It is always advisable to compare the lenders and choose the one which can be trusted as well as which can offer you the best deal. This also saves you from fraud. Usually, it is best to borrow from the bank where you already have an account.
  2. Read! It is necessary to read the documents and deals carefully so that you can know explicitly and clearly the terms of the loan. This is something you cannot compromise on as it will save you from future shocks.
  3. Know your rights! It is always beneficial to know about your rights and benefits that you can use for your benefit while availing of a home loan.

How to Get the Lowest Rate of Interest on Home Loans

Certain tips and tricks can save you from paying heavy amounts on your home loans. Provided you follow these practices you can avail the best interest rates in the market.

  • Maintain Excellent CIBIL Score

CIBIL score also known as credit score is an indicator of your creditworthiness. A high credit score reflects responsible credit behaviour and vice-versa. It is also important to note that applicants with a lower credit score will pay higher interest on their housing loans. A higher credit score dictates the efficiency with which you have paid off your previous loans. Having a good credit score will allow you to enjoy certain benefits like availing of the lowest interest rates in the market.

  • Have a co-applicant

You can get the lowest housing loan interest rate if you apply for a housing loan jointly with your spouse as a primary applicant of your housing loan amount. Also, certain lenders allow a lower interest rate for women. Availing joint home loan will also increase your home loan eligibility that will enable you to have an easy home loan and also enjoy home loan tax benefits.

  • Consider Availing Home Loan Balance Transfer

A home loan balance transfer is when a borrower shifts his remaining loan balance to a new bank, due to better interest rates or better repayments tenure structure. You can even opt for a home loan balance transfer if your current bank or financial institution is charging a higher rate of interest. You can switch to another bank, which offers a lower rate of interest. But before making the switch, consider the total cost of the loan transfer. 

  • Pay off a heavy Home Downpayment

The loan amount is one of the main factors that affect your housing loan interest rate. The higher loan amount usually attracts a higher interest rate and vice-versa. To get a home loan at the lowest possible interest rate, it is advisable to try paying off your loan amount by contributing more towards your home down payment.

Documents Required for Home Loan

Documents Required Salaried Self Employed
Application Form Signed with photographs Signed with photographs
Identity Proof PAN Card, Passport, Driving License, Aadhaar Card, Voter Id, Govt issued I-Card PAN Card, Passport, Driving License, Aadhaar Card, Voter Id, Govt issued I-Card
Certificate and Proof of Business Existence NA PAN, Sales tax/ Excise/ VAT/ Service tax registration, Copy of partnership deed, Trade license, certificate of practice, registration certificate issued by RBI, SEBI
Address Proof Passport, Driving License, Election ID Card, Electricity/ Telephone/ Mobile bill/ Bank statement (not more than 3 months old) Bank statement, Utility bill, Registry copy, Lease or rent agreement, TAN allotment letter
Age Proof PAN Card, Passport, Driving License, Voter ID Card, Birth Certificate, Employee ID Card (only for PSU/ Government employees), School/ college leaving certificate PAN Card, Passport, Driving License, Voter ID Card, Birth Certificate, Employee ID Card (only for PSU/ Government Employees), School/ College leaving certificate
Property Documents Past title chain – Conveyance deed, Sales deed, Allotment letter, Possession letter, Latest property tax receipt, Copy of approved plan for construction loan/ extension Past title chain – Conveyance deed, Sales deed, Allotment letter, Possession letter, Latest property tax receipt, Copy of approved plan for construction/ extension

FAQ’s About Home Loan Interest Rates 

✅ How is the Home Loan interest rate calculated?

The interest rate of home loans is directly dependent on the repo rate. After adding a margin on the repo rate RLLR is calculated which is used to calculate the home loan rate.

Effective Interest Rate (EIR) = Base Rate + Markup

External Benchmark Rate is the minimum rate set by the Reserve Bank of India as lenders cannot sanction loans to customers below this benchmarked rate. It is subject to frequent changes depending on various inputs and conditions.

Markup: A margin is added above the external benchmark rate to get the Effective interest rate (EIR). The markup may vary from one scheme to another.

✅ What is the tenure of a house loan?

Home Loans are quite long tenure loans that can range from a period from 5 years to 30 years depending on the need of the borrower, his age and his income.

✅ Which is better: fixed or floating rates?

A fixed home loan is a better option as it will secure you from any fluctuations of interest rates in the market. A floating home loan, on the other hand, is a better option when you think that the interest rate will drop in the future. Check the basic differences between both these rates:

Fixed Interest Rate Floating Interest Rate
Higher Interest Rate Lower Interest Rate
Not affected by financial market conditions Affected by changes in the financial market
Fixed EMIs EMIs change as per interest rate or MCLR
Budget planning possible Difficult to budget or manage financials
Sense of security Generates savings
Suitable for short/medium term (3-10 years) Suitable for long term (20-30 years)
Lesser risk Higher risk

✅ Can I reduce my home loan interest rate?

If you have a low CIBIL score then there are chances that your home loan interest rate will be lower. Also, some banks offer discounted rates where a woman is the main applicant.

✅ Can I apply for a housing loan co-jointly?

Yes, you can apply for a home loan jointly with an immediate earning co-applicant. Adding a co-applicant will also increase your own eligibility for a better loan interest rate.

✅ Can I avail myself of a balance transfer for a home loan?

Yes, if you are getting a lower rate of interest on a home loan with any other lending institute, then you can easily opt for a balance transfer.

✅ Is a top-up facility available on my existing home loan?

Yes, you can avail of the top-up facility on your existing home loan provided that you have made timely repayment of EMIs for the loan tenure so far. 

✅ How can I reduce my housing loan EMI burden?

You can easily reduce your home loan EMI burden using the following steps:

  • Transfer your existing loan to another bank offering a housing loan at a lower interest rate, known as the home loan balance transfer
  • Increase your home loan EMIs to reduce the total interest payable
  • Pay heavy down payment

✅ Can I switch from a fixed rate to a floating rate during my tenure?

Yes, various banks and NBFCs allow their customers to switch from fixed-rate home loans to floating rate home loans. Home loan borrowers can make the switch any time during their loan tenure for which they are charged a small fee, which varies from one lender to another.

✅ Which are the best banks/NBFCs to get a housing loan from?

The top lenders offering home loans in India are:

  1. State Bank of India (SBI)
  2. HDFC 
  3. Punjab National Bank
  4. Private Bank
  5. HSBC
  6. Axis Bank
  7. Bank of Baroda
  8. Canara Bank
  9. City Union Bank
  10. IDBI

News on Home Loan Interest Rates

Private Bank has lowered its home loan interest rates to 6.75 per cent.

For the month of May, Private Bank cut home loan rates in order to draw more borrowers. The interest rates on new home loans begin at 6.75 per cent. Home loan borrowers will benefit from the new home loan rates.

Bajaj Home Finance has lowered the interest rates on its Top Up loans.

Top-up loan rates at Bajaj Home Finance have been reduced to 8%. The new rates will take effect on May 10, 2021.

Axis Bank lowered its balance transfer rates on home loans to 6.70 per cent.

In order to entice home loan borrowers, Axis Bank lowered its balance transfer prices. The new rates begin at 6.70 per cent and go up from there. The new rates will take effect on May 1, 2021.

HDFC has lowered its home loan interest rates to 6.75 per cent.

HDFC has lowered its home loan interest rates to 6.75 per cent. The new mortgage rates will take effect on March 3, 2021