A big factor that affects the overall cost of your estate is the home loan rate. Owing to the higher valuation and longer tenure of home loans, interest on house loans may carry long-term financial effects for investors. Having lower home loan interest rates would not only decrease the EMI, but also the interest repayment. Therefore, home loans investors should strive to get housing loans at the lowest rate available. There are numerous other fees and charges, in addition to the home loan interest rate and loan amount, which investors must take into consideration. Whereas most of the lenders offer the same home loan rate but different related fees and charges, which may raise or reduce your loan burden based on the valuation. Identifying home loan fees and charges also helps better manage the payout. Hence, below we have listed some banks and HFCs (Housing Finance Companies) that are offering the lowest interest rates on home loans.
Banks giving the lowest interest rates on home loans
For a loan amount of Rs 75 lakhs with a term of 20 years, Kotak Mahindra Bank appears to dominate the list of cheapest home loan offerings with 6.75 per cent. The state-owned gargantuan State Bank of India provides the eligible investors with the lowest interest rate of 6.8%. A specific rate for home loans of Rs 75 lakh is also provided by some other public sector bank, Punjab National Bank (PNB) and the country's largest mortgage lender, HDFC.
|Banks||ROI in % p.a.|
|Kotak Mahindra Bank||6.75|
|Punjab National Bank||6.8|
|Bank of India||6.85|
|Central Bank of India||6.85|
|Bank of Baroda||6.85|
|Punjab & Sind Bank||6.9|
|Union Bank of India||6.9|
Housing Finance Companies providing the cheapest rates on home loans
Housing finance companies (HFCs) have been slashing their rates as well. HFCs are non-banking firms that provide eligible investors with loans. For investors, they are also a favoured option because paperwork is hassle-free, allows homebuyers better loan-to-value, and often provides loans to people with poor credit ratings. Take a brief glance at the interest rates on home loans from HFCs below. The below-listed rates as of Feb 19-2021, may vary based on the loan amount, type of borrower, credit score, income background of the borrower, the loan-to-value ratio, and any other conditions specified by the lender.
|HFCs||ROI in % per annum according to the loan amount|
|Less than Rs 30 lakh||Rs 30 lakh up to Rs 75 lakh||> Rs 75 lakh|
|Piramal Cap & Housing Fin||NA||NA||NA|
|PNB Housing||7.35- 9.45||7.35- 9.60||7.70- 9.6|
|Central Bank Housing||9.80-11.0||9.80-11.0||9.80-11.0|
|Indiabulls Housing Fin||>=8.65||>=8.65||>=8.65|
|Aditya Birla Housing Fin||9-12.5||9-12.5||9-12.5|
|GIC Housing Finance Ltd||9.1-12.5||9.1-12.5||9.1-12.5|
|Reliance Home Finance||9.75-13||9.75-13||9.75-13|
|Sundaram Home Finance Ltd||>=7.85||>=7.85||>=7.85|
|LIC Housing Finance Ltd||6.9-7.85||6.9-8.05||6.9-8.1|
Tips to get a home loan at the best possible rate
At the lowest standard, there is no fixed methodology for using housing loans. There are, though, a few exercises that can help you make use of the lowest possible home loan offer are as follows:
- Banks use your credit ratings initially to set home loan interest rates over and above the external benchmark rate, as per RBI guidelines. Because a high credit score represents prudent credit activity, applicants with a lower credit score can pay higher interest on their home loans, and conversely. And, borrowers can receive lower rates with a higher credit score.
- If you jointly apply for a home loan with your spouse and make her the principal claimant for your home loan, you can get the cheapest housing loan rate. Many banks provide women with interest rate concession home loans at an interest rate that is less than 0.5 per cent of the standard interest rate on home loans. A joint home loan would also improve the eligibility for your home loan, as well as tax deductions on home loans.
- If your existing bank or financial company is offering a higher rate of interest, you also may ask for a home loan balance transfer. You can migrate to a different bank that provides a better interest rate. However, examine the entire cost of the loan transfer before considering the step.
- Another aspect that determines your home loan rate is the loan amount. The related collateral risk also improves for lenders, as the home loan value increases. Lenders impose a higher interest rate to cover the raised risks. It is thus suggested to the investors to contribute a higher down payment.
Aspects that influence home loan rates
Considerations accountable for the rise or fall in the interest rate on housing loans are:
- Lenders are now using the credit history initially to adjust home loan interest rates over and above the external benchmark limit. A higher rate of interest on home loans causes a lower credit score and conversely.
- The loan amount you repay will also impact the rate at which the housing loan is issued. As opposed to home loans of a higher amount, home loans up to Rs. 30 lakh typically have a cheaper interest rate.
- For salaried employees usually, the home loan interest rate is less than the interest rate provided to self-employed individuals.
- The interest rate on home loans is of two types i.e. fixed and floating. For your home loan, the type of interest rate you select will evaluate the rate at which you will reimburse your lender. EMIs stay the same for the total loan term in the context of fixed-rate home loans. On the other extreme, floating rates vary due to the adjustment in the lending rate, like the Repo Linked Lending Rate (RLLR).
- The rate of interest on home loans also varies according to the type of home loan. Standard home loans have standard rates, whereas their alternatives typically have a higher interest rate, such as home loans for NRIs.
- According to the RBI, interest rates on housing loans are related to external benchmark rates. Under the new structure, the home loan interest rate of all banks in India will be influenced by any adjustment in the external benchmark rate.