Home Loan Interest Rates

• Home loan interest rate is the percentage at which additional funds are charged by a lender on the amount borrowed to purchase, construct or renovate a house.
•  It is a key factor that determines your monthly EMIs and overall cost of credit repaid over the loan tenure.
• The home loan interest rate applicable depends on multiple factors such as credit score, loan amount, loan tenure, employment type (salaried or self-employed), income stability, and the lender’s internal risk assessment.
• Most home loans are linked to RBI-mandated external benchmarks like the repo rate.

• Paisabazaar shows curated home loan offers from multiple lenders, all in one place.
• You can see home loan interest rates based on your credit score on Paisabazaar.
• You can also see pre-approved home loan offers you are eligible for.
• It also displays the processing fees, maximum loan amount, EMI, loan process and documents required during the loan application.

• The interest rate remains the same throughout the loan tenure, keeping the home loan EMI constant.
• It is better to apply home loan at a fixed interest rate when the current home loan interest rate is quite low and is expected to increase in the future.

• Floating interest rate, also known as the variable rate of interest, is subject to the current market lending rates
• The interest rate may change during the loan tenure.
• Home loan EMIs will increase or decrease as per the interest rate movement.

• Hybrid rate home loans are a mix of fixed-rate and floating-rate home loans.
• They initially have a fixed interest rate for a fixed period, after which it converts into a floating interest rate.

• Home loan interest rates, fixed or floating-type, have direct impact on your EMIs and may increase or decrease your overall cost of credit:
•  Low interest rate will help you pay lower EMIs whereas the EMI amount increases in case of higher interest rates.
•  EMI is not impacted in case of fixed-rate loans throughout the loan tenure.
•  In case of floating-rate home loans, interest rate and EMIs are relatively lower than fixed-rate loans.
•  When repo rates change, interest rates also change in case of floating-type home loans.

• Avoid High Loan Cost: You can opt for a lender offering a lower interest rate and eventually save on your EMIs and interest cost.
• EMI Planning: Knowing the interest rates and other charges beforehand can help you plan your EMIs within your budget without compromising on your crucial financial goals.

Note that even a 0.5% difference in interest rate can help you save substantially.

• Public Sector Banks, generally, offer home loans at lowest interest rates
• Private Sector Banks offer home loans at relatively higher interest rates
• HFCs offer a relatively higher interest rate to borrowers
• As banks follow EBLR strictly, benefits of repo rate cuts are passed on to the borrowers quickly
• HFCs revise their interest rates at their own discretion and thus the impact on rates may take longer to reflect
• HFCs adhere to risk-based pricing strictly so the rates vary significantly for different applicants
• In long term, bank home loans are more economical whereas cost of loans for HFCs can be higher.

• RBI lends to bank at repo rates and any variation in this rate impacts the retail lending rates
• When RBI reduces the repo rate, banks also reduce home loan interest rates for floating-type home loans
• An increase in the repo rate increases the cost of borrowing for banks and thus home loan interest rates also increase for floating-type home loans
• Borrowers with fixed-rate home loans have almost no impact on their loan
• Home loan borrowers benefit from repo rate cuts if their loan is linked with repo rate or EBLR.

• To be eligible for the lowest home loan interest rates, follow these points closely –
• Maintain a high credit score, preferably above 750 to be eligible for the best home loan offer.
• Keep your EMI/NMI ratio low as lenders prefer borrowers having this ratio below 50-55% after loan sanctioning.
• Compare home loan offers from multiple lenders before applying for one.
• A higher down payment reduces the lender’s risk so it can help get low rates.
• A clean repayment record and stable income helps get a better loan offer.

• Pradhan Mantri Awas Yojana (PMAY) offers subsidy to eligible borrowers effectively lowering the cost of loan.
• Affordable housing for women come with relatively lower interest rates
• Lenders offer special rates to borrowers who qualify for the EWS, LIG and MIG categories
• Subsidies provided by the government are credited directly to the lender reducing the principal and EMI burden for the borrower.