Public and private sector banks provide home loans for buying a plot of land, house construction, purchase of constructed residences, refurbishment of existing ones upon a certain rate of interest (ROI) on equated monthly installment (EMI), either after down payment or full financing, to salaried and self-employed individuals. Added interest rates on the lump sum advance of funds are crucial to determine if you can afford to take a home loan.
One’s income as well as credit history plays a vital role in getting an attractive ROI on the borrowed sum, which means that higher your credit score lesser the ROI and vice-versa, and is calculated on the basis of the tenure, loan amount as well as one’s relationship with the bank.
The policy repo rate hike by the Reserve Bank of India (RBI) in Sept. 2022 to 5.9% has led many banks to increase their interest rate on loans. As per RBI, the average rate on 1-year MCLR, or the lowest lending rates, of scheduled commercial banks (SCBs) increased from 7.65% in Aug. 2022 to 7.75% in Sept. 2022.
Forbes Advisor India has put together a list of home loaninterest rate currently offered by major public and private sector banks of India to help you better understand the types of plan that may suit your personal finance needs.
Home Loan Interest Rates in 2023
The above interest rates and details on home loan are updated as on Nov. 17, 2022. While we update this information regularly, the rate of interest and loan details may have changed since the page was last updated.
Related: Best Home Loan for 2022.
How do Banks Calculate Interest Rate on Home Loans?
Interest rates for home loans provided by banks in India are usually floating, though fixed rate is also available. A fixed rate of interest on loans is fixed for the overall duration of the loan. With a floating rate, the ROI on your EMI is calculated as per the “base rate” (standard lending rate of the bank), or the lender’s repo-linked loan rate (RLLR) or marginal cost of fund-based lending rate (MCLR), plus the spread (difference in interest rates that a bank pays to a depositor and receives from loan borrowed to a customer).
The RoI on the floating rate on home loans for every bank changes as per the RBI’s change in repo rate (the rate at which the apex bank lends money to public and private banks). In the floating rate, the change is, however, reflected after the “reset period” when the interest rate on your EMI is subjected to revisions.
How to Increase Home Loan Eligibility in 2023
Home loan eligibility determines the maximum amount a bank can borrow to an applicant. Here are some factors to consider:
CIBIL or credit score: An applicant with an excellent credit score, with good repayment history has more chances to obtain a maximum home loan amount. Most bBanks provide home loans even to people with low scores, however, 750 and above is considered a good one.
Joint home loans: If you opt for a co-borrower, usually spouse, with a good credit score for a Joint home loan, it considerably boosts your eligibility chances as well as divides repayment burden.
Longer tenure: It helps you lower the EMI amount while choosing a longer repayment period.
Clear existing debts: An applicant opting for a home loan may consider clearing the existing debt or ongoing EMIs to boost their eligibility.
Higher down payment: Banks provide 75% to 90% of the property value, and the remaining has to be paid by an applicant. Consider raising the down payment to avoid higher interest payout when the EMI begins..
How to Select the Best Home Loan
It is important to understand the various aspects of the loan to select the best home loan that suits for financial needs. Factors that influence your selection of home loan includes:
Rate of interest: The RoI is an important factor that determines how much you will pay when the EMI begins. Currently, home loan rates of interest are as low as 8% per annum. Remember, most banks offer women borrowers 0.05% discount on the regular rates.
Maximum loan amount: Depending upon other eligibility factors, the maximum amount one can borrow depends upon the cost of the property and your income levels. Banks fund 77-90% of the value of the property based on the eligibility criteria.
Processing charges on home loan: This charge is levied by the bank to process your application. While some banks do not charge any processing fee for a certain loan period and amount, currently, the charges are as low as 0.25% up to 2%. For the salaried and women borrowers, charges are usually lower.
Prepayment charges: The charge is levied when you decide to close the loan before the maturity date, which varies among banks.
What the market is offering: It is mandatory for banks to display all relevant information on customer care service, interest rates, charges, and others in their website, apps, flyers, etc. The above table will help you understand the bank’s offer before you visit the websites or physical branch of the lenders.
Tax benefits: Home loans come with various tax exemptions and deductions for borrowers under Section 24, Section 80C, Section 80EE under the Income Tax Act.
Frequently Asked Questions (FAQs) For Home Loan Interest Rates
What are other charges for availing a home loan besides the processing fee?
Depending on banks, other charges that may be applicable are login fee, registration fee, administrative charges, along with GST charges.
