The beginning of March this year witnessed a flurry of action in the home loan category, with State Bank of India lowering its lowest rate to 6.7 percent for loans of up to Rs 75 lakh and 6.75 percent for loans of more than Rs 75 lakh. Such existing best rates will be available only to salaried applicants with CIBIL credit scores of over 800. Women borrowers, on the other hand, would get a 5% rate reduction. If you're planning to purchase a home now is the best time to do so, as home loan interest rates and stamp duty rates in some states, like Maharashtra and Karnataka, tend to drop. In recent years, homebuyers have seldom had it so sweet. If you have a current home loan and are paying higher interest rates, now is the time to make a move. A home loan balance transfer will save you a lot of money in interest payments over the term of the loan. Hence, below we have covered top banks and HFCs (Housing Financing Companies) that are currently providing the cheapest rates on home loans for a Rs 75 lakh loan with a tenure of 20 years.
Tips to reduce your home loan EMI
When you avail a home loan, the interest rate you pay and the loan's tenure are the two major factors that determine the amount of equated monthly installment (EMI) you will bear. Here are few tips about how a new or current home loan borrower can effectively reduce their EMI load.
For fresh borrowers
The first step in lowering your home loan EMI is to find a lender that provides a loan at a cheaper rate of interest. That being said, figuring out how to get a home loan and from which lender can be difficult. Furthermore, you may not always be able to determine which lender is providing a cheaper home loan bid. Here are a few suggestions that will help you get a decent offer on a home loan and, as a result, lower your EMI payments.
- Going online is also one of the fastest ways for home loan applicants to compare home loan offerings. There are a number of websites and internet portals that provide a summary of the interest rates, charges, and other costs charged by various lenders. As a result, do your analysis before applying for a home loan to obtain the best possible offer.
- When you choose a longer term, you will end up spending more interest on your unpaid home loan debt. Before taking out a home loan, you can still determine the term and interest rate options open to you. Make the most of your EMI payments, but just as many as you can afford to spend per month. So, consider the tenure of your home loan since it will affect the amount of EMI you will have to pay per month.
- Instead of only paying the minimum necessary down payment, you should generate a higher deposit from your own wallet. The more you put down as a down payment, the cheaper your LTV ratio and loan amount needed would be, which will improve your loan eligibility and raise the odds of getting approved. However, be careful not to outlast the finances or jeopardise the accomplishment of other critical priorities when attempting to make a larger down payment.
For existing borrowers
If you already have a home loan and want to lower your EMI payments by getting a higher interest rate, there are several tactics you can use to reduce your EMI and debt load too:
- When you assume you have availed a loan with a high interest rate, you can still consider refinancing it. Banks typically have interest rates dependent on the MCLR system, which varies by lender. In this case, you can turn to a lender that offers cheaper rates.
- Prepaying a portion of your loan reduces the overall loan balance and, as a result, the total interest due. As a result, either the EMI amount or the repayment period will be shortened. Lenders typically allow you to pay in advance your unpaid home loan balance in whole or in part. If you pay in advance a portion of your loan, you can minimize the EMI payments by agreeing with the lender.
Tips to improve your home loan eligibility
Checking the eligibility requirements when comparing home loan plans and rates are a must and first. Check the eligibility requirements when comparing home loan plans. That being said, you may stumble out with a loan that you think is right for you, but not for your eligibility. By following the below-listed tips you can boost your home loan eligibility.
- Just because you have taken out a loan, please ensure you have paid off all the EMIs. Before accepting the loan, the bank will verify to see if you have any other outstanding debts. If the debt-to-income ratio is lower, you're more likely to be given a home loan at cheaper rates.
- Before approving you for a home loan, the lender will run a background check on you. If you have a poor credit score, the bank will either refuse your home loan application or grant you one with a higher rate of interest. As a result, before applying for a home loan, make sure you strengthen your credit score by paying all of your EMIs, credit card payments, and other bills on or before the deadline.
- When applying for a home loan, it is advised that you choose a longer repayment period. Despite the fact that the overall amount of interest payable will rise, the total amount of EMI you will reimburse will decrease significantly.
- Rather than just taking out a home loan on your behalf, it is advised to take a home loan jointly. It's definitely a smart idea to have your spouse as a co-applicant if you're married. It will not only help you improve your eligibility, but it will also provide you with other perks. Taking out a loan with a co-applicant would allow you to get a higher loan amount with lower interest rates. You and your wife will also benefit from the tax advantages that come with paying home loan EMIs.
- If you can reveal that you have a secondary source of income, your chances of getting a home loan rise. In case you generate additional revenue apart from your job, you can use it to increase your eligibility to apply for a home loan plan of your preference.
Taxation on home loan
When you purchase a house with a home loan, you get a lot of tax incentives that will help you save a great deal of tax outgo. We have covered more about the same below.
Tax benefit on interest payout- A home loan must be used to buy a home, and the house must be finished within 5 years of the end of the fiscal year in which the loan was granted. If you're paying an EMI on a home loan, there are two parts of it: interest and principal repayment. Section 24 allows you to subtract the interest component of your EMI paid for the year from your annual income up to a limit of Rs 2 lakh. The overall deduction for interest charged on self-occupied house property is Rs 2 lakh from Assessment Year 2018-19 onwards. There is no maximum amount of interest that can be claimed on rented property.
Tax benefit on principal repayment- Section 80C allows you to deduct the principal part of the EMI for the year. The amount that can be claimed is limited to Rs 1.5 lakh. However, the house property must not be sold after 5 years of ownership in order to assert this deduction.
Tax benefit on stamp duty and registration fees- Apart from the deduction for principal reimbursement, an exemption for stamp duty and registration fees can also be sought under section 80C, but only up to Rs 1.5 lakhs in total.
Tax benefit under section 80EE- Homebuyers are eligible for an additional deduction of up to Rs 50,000 under Section 80EE. To qualify for this deduction, the loan sum must be less than Rs 35 lakhs and the property valuation must not surpass Rs 50 lakhs. The loan must have been approved between April 1, 2016 and March 31, 2017. And the individual does not own any other property at the time the loan is approved.
Tax benefit under section 80EEA- In the 2019 budget, an additional deduction of up to Rs 1,50,000 has been added under Section 80EEA for home buyers. The stamp value of the property must not exceed Rs 45 lakhs to qualify for this deduction. The loan must have been sanctioned between 1 April 2019 to 31 March 2020 in order to avail this tax benefit.
Tax benefit in case joint holders- Both of the loan holders can subtract up to Rs 2 lakh in home loan interest and up to Rs 1.5 lakh in principal repayment u/s 80C in case of a joint home loan. They must also be co-owners of the house taken on loan to be eligible for this exemption. As a result, if you take out a loan for your family, you will be able to claim a higher tax advantage.
Home Loan Rates
Currently, in the home loan category two banks i.e. Kotak Mahindra Bank with 6.65% and State Bank of India (SBI) with 6.75% are providing the cheapest interest rates which are valid until March 31, 2021. ICICI Bank entered the group, reducing its rates to 6.70 percent for loans up to Rs 75 lakh and 6.75 percent for loans above Rs 75 lakh. For data collection, all mentioned public/private sector banks and HFCs that provide the cheapest rates on home loans up to Rs 75 lakh are considered here. Banks and HFCs are classified in increasing order by the interest rate in their respective segments, with the bank/HFC providing the cheapest rate on a home loan of Rs 75 lakh at the top and the highest at the edge.
|Sr No.||Banks & HFCs||ROI in % per annum|
|1||Kotak Mahindra Bank||6.65|
|2||State Bank of India||6.75|
|7||Punjab National Bank||6.8|
|8||Bank of India||6.85|
|9||Central Bank of India||6.85|
|10||Bank of Baroda||6.85|
|12||Punjab & Sind Bank||6.9|
|17||Bank of Maharashtra||6.9|
|18||LIC Housing Finance||6.9|
|20||Sundaram Home Finance||6.9|