Home loan is a secured loan offered by Banks, NBFCs and HFCs to help you buy a residential property. In this, the property you are buying is mortgaged to the lender as security till the full repayment of the home loan.
Currently, home loan interest rate starts as low as 6.40% per annum. Lenders usually sanction 75% to 90% of the property value as loan, which can be repaid in EMIs over flexible tenure usually up to 30 years. Other benefits that come with a housing loan include annual tax benefits, balance transfer facility and top-up loan facility.
With multiple lenders offering a home loan, finding the best home loan offer can be challenging. At Paisabazaar.com, we help you compare, select and apply for the best home loan from India’s largest Banks, NBFCs and Housing Finance Companies (HFCs). We provide comprehensive information on home loans along with the convenience to apply for a home loan online in just a few steps.
Interest rate can significantly influence the total cost of a housing loan. As home loans are usually of higher value and longer tenure, even a slight difference in its rate of interest can lead to long-term financial implications. Therefore, when looking for a home loan, you should choose the lowest rate on offer. Getting a housing loan at a lower rate of interest will not only reduce your outgoing EMIs but also the overall home loan interest payout.
Here is the list of top 10 lenders that offer the cheapest home loans in India:
|Lenders||Interest Rate (p.a.)||Processing Fees|
|Union Bank of India||6.40% – 7.65%||No processing charges up to 31.12.2021|
|Punjab National Bank||6.50% – 7.95%||0.25% – 0.50% (Min. Rs. 8,500 & Max. Rs. 25,000)|
|Bank of Baroda||6.50% – 8.25%||0.25% – 0.50% (Min. Rs. 8,500 & Max. Rs. 25,000)|
|Bank of India||6.50% – 8.35%||No processing charges up to 31.12.2021|
|Kotak Mahindra Bank||6.55% onwards||Up to 1% plus statutory dues|
|LIC Housing Finance||6.66% – 8.05%||As applicable|
|HDFC||6.70% – 8.70%||Up to 1% plus statutory dues|
|ICICI Bank||6.70% – 7.55%||0.50% – 2.00% or Rs. 1,500 (Rs. 2,000 for Mumbai, Delhi & Bangalore), whichever is higher|
|State Bank of India||6.70% – 7.75%||No processing fee|
|Bajaj Finserv||6.70% – 14%||Up to 6%|
Note: Home loan interest rates as of 11th November 2021. Home loan rates in the table are subject to the credit/ risk profile as assessed by the lender on the basis of parameters such as credit scores, age and repayment capacity of the applicant. Housing loan interest rates in the table are subject to change anytime without prior notice.
Prospective homebuyers, usually, are more concerned about the home loan interest rates and tend to overlook other expenses involved in taking a home loan. These additional charges also make up the total cost of your housing loan and hence must be factored-in when deciding on an offer. Below are some of the fees and charges that may be applicable to your home loan.
The Government of India offers tax benefits on home loans under the Income Tax Act of 1961. These home loan tax benefits help borrowers save a substantial amount of money every year. Below are the tax benefits that you can get on your home loan EMI payments:
|Home Loan Tax Benefit 2021-22|
|Section of Income Tax Act||Nature of Home Loan Tax Deduction||Max. Tax Deductible Amt.|
|Section 24(b)||Interest paid||Rs. 2 lakh|
|Section 80C||Principal (including stamp duty and registration fee)||Rs. 1.5 lakh|
|Section 80EE||Additional interest (for first-time home buyers)||Rs. 50,000|
|Section 80EEA||Additional interest (for affordable housing)||Rs. 1.5 lakh|
Note: In addition to the Section 24(b) of IT Act, you can claim tax benefit on home loan interest either under Section 80EEA or Section 80EE.
Home loan eligibility differs across lending institutions and loan schemes. However, common set of housing loan eligibility criteria is given below:
Apart from these, your home loan eligibility also depends on the property you are buying and the location of the property.
Home loan application forms usually have a checklist of documents that applicants need to submit to their lenders. These documents are usually the same for all lenders; however, a few specific requirements may vary depending on the chosen loan scheme, purpose of the loan and individual credit profile.
Some of the common documents required for getting a home loan are:
Note: The above list is indicative and your lender might ask for additional documents.
You can compare and apply for eligible home loan offers in three simple steps:
Step 1- Share Your Details
Enter personal information as well as the details related to your loan requirements.
Step 2- View Offers
As per the details shared, a list of eligible home loan offers will appear. Compare interest rate, processing fee and eligible loan amount from the list of eligible home loan offers.
Step 3- Submit the Application
Apply for the home loan offer that suits your loan requirements the best.
Once your application is successfully submitted, you will get a confirmation of your home loan application along with a reference number for future reference. Next, our loan expert will get in touch within 24 hours to take this application forward.
Q. Can I get a home loan for the entire property value?
A. No. Banks usually keep a 20% margin when providing individuals with a home loan. This means that the lender may agree to provide you with 80% of the property value as a home loan, while you will have to shell out the remaining 20% by yourself. In some cases, the lender may agree to provide you with up to 90% of the property value as a home loan, depending on multiple factors such as your repayment capacity, age, credit score and property related details such as its location, age and market value.
Q. For what purposes can you avail a home loan?
A. Following are few of the reasons to avail a home loan –
Q. Which bank is the best for home loans?
A. Some of the most popular banks offering home loans in India are HDFC Bank, SBI, PNB, ICICI Bank, Bank of Baroda, Axis Bank and Canara Bank. However, the best home loan for you would be the one that matches your loan requirements. Therefore, to get the best bank for home loan first analyse your requirements. Also, when comparing home loan offers don’t jump for the offer that offers the lowest interest rate, rather check on the entire deal. Besides the interest rate, pay attention to other parameters such as processing fees and loan repayment and prepayment policies.
Q. How much credit score should I have to get a home loan?
A. Credit score is a number between 300 and 900 that reflects how you handled your credit in the past. It not only affects the chances of your loan approval but also the interest rate at which you can borrow a sum. Most lending institutions offer the lowest rates to borrowers who have a credit score of 800 or above. Otherwise a credit score between 750 and 900 is considered good by lending institutions. Remember, higher the credit score, greater are the chances of getting your home loan approved and getting a lower preferential interest rate. Even if your credit score is low, you can improve it by paying credit card bills on time, decreasing your outstanding debt and maintaining old credit card accounts in good standing.
Q. Who can cosign a home loan with me? Can my friend cosign a home loan for a flat?
A. Your family members like father, mother, siblings, etc. can co-sign a home loan with you. Other than that your spouse or adult children can also be co-signatories in case you are applying for a home loan. In India, as per existing rules, your friend cannot co-sign a loan as he/she is not a blood relative or otherwise related to you.
Q. How many people can cosign a home loan with me?
A. At present, up to 7 people can cosign a home with the primary applicant. However, all of them need to be blood- relatives of the family member.
Q. What are the reasons for home loan rejection?
A. Factors that can play a crucial role in home loan rejection are mentioned below:
Q. How to avoid home loan rejection?
A. The below mentioned steps can prove to be beneficial to avoid home loan rejection:
Q. How to improve home loan eligibility?
A. Potential home loan borrowers can enhance their home loan eligibility in the following ways:
Q. Are there any prepayment charges in case of a home loan?
A. In case of a floating rate home loan, lenders don’t charge a pre-payment penalty as per RBI directives however a penalty may be applied in case of prepayment of a fixed-rate home loan.
Q. What is a LTV Ratio?
A. Loan-to-Value (LTV) Ratio is one of the factors, based on which a lender sanctions a home loan. It tells you the maximum loan you can get against the appraised value of the property you pledged as collateral. It is always expressed in percentage. So, if you are buying a home costing Rs. 1 crore, and your lender’s LTV ratio is 75%, then the maximum financing or loan you will get from your lender is Rs. 75 lakh.
Lenders use LTV Ratio and other such series of calculations to assess their risk in sanctioning a secured loan such as a home loan. With this ratio, a financial institution ensures that it does not sanction a loan amount higher than the appraised price of the property. For a lender, a higher LTV ratio increases the perceived risk of default. Also, it is important to note that property value is not the sole factor that determines the loan amount. Lenders also consider other factors such as your credit score and repayment capacity to decide the loan amount. Lenders use LTV ratio only to determine the maximum loan amount, based on the property value.
Q. What is a home loan balance transfer?
A. Home loan balance transfer is a facility that allows home loan borrowers to transfer their outstanding home loan to a new lender for lower interest rate or better loan terms. Almost all lenders offer the home loan transfer facility to their customers. Paying your loan EMIs regularly is one of the factors that help you enjoy loan transfer facility. But before going for home loan balance transfer, carry out a cost-benefit analysis. Calculate the difference between the interest rates offered by the two lenders, the amount of the loan left unpaid and the remaining tenure.
Home loan balance transfer is not an ideal option if the outstanding loan amount is low, if only a few repayment years are remaining or the difference in the interest rate is leading to negligible savings. Also, do not forget to consider processing fee charges, which the new lender would be charging for balance transfer.
Q. What are the different types of home loan available in India?
A. Banks and Non-banking Finance Companies (NBFCs) offer home loans for different purposes. So before applying for any type of home loan, assess your requirements in order to get a suitable home loan scheme. Some of the types of home loans available are as follows:
Kotak Mahindra Bank is offering its home loan at 6.5% p.a.
10 September 2021: Kotak Mahindra Bank was offering home loan at the lowest rates but has decided to lower it further for a limited festive period. Currently, Kotak Mahindra home loan interest rate is 6.50% p.a., which is applicable on both fresh and home loan balance transfer loans. This special home loan rate is valid from 10th September, 2021 to 8th November 2021.
LIC Housing Finance lowers its home loan interest rate
01 July 2021: LIC Housing Finance has lowered its home loan rate from 6.90% to 6.66%. This is a limited period offer applicable to the loans sanctioned till August 31, 2021. The home loan interest rate is available on loan amounts of up to 50 lakh (salaried individuals) and for a tenure of 30 years. However, Kotak Mahindra Bank and Punjab and Sind Bank offer the lowest home loan interest rates at 6.65%. However, borrowers need to know that these interest rates are available only to applicants with a credit score of 800 and above.
RBI keeps repo rate unchanged
04 June 2021: The Monetary Policy Committee (MPC) of RBI has kept the repo rate unchanged at 4%. Since October 1, 2019, RBI has mandated banks to offer retail loans such as home loan linked to an external benchmark, which for most banks is the RBI repo rate and are called Repo Linked Lending Rate (RLLR). There may not be a big impact on the home loan interest rate even though going forward, the MCLR may see a minor fall with some banks.
Punjab National Bank reduces its MCLR
01 June 2021: PNB has reduced ìts 1-year Marginal Cost of Funds Based Lending Rate (MCLR) by 0.05% to 7.30%. The revised MCLR rates came into effect from June 1, 2021. The bank has also reduced its 6-month and 3-month tenor MCLR by 0.10%. While, 1-month, overnight, and 3-month MCLRs remained at the same level at 6.70%, 6.65% and 6.80%, respectively.
SBI reduces its home loan interest rate
01 May 2021: From today, the State Bank of India has reduced its housing loan interest rates from 6.95% per annum to 6.65% p.a. SBI home loan interest rates will start from 6.7% for loans up to Rs 30 lakh and 6.95% for loans above Rs. 30 lakh and up to 75 lakh. The big-ticket loans above Rs 75 lakh would get home loans at 7.05%. Further, women will get a special 5 bps concession, resulting in decreases in home loan rates by another 0.5%. Customers can also apply for a loan from the ease of their home via the YONO App to earn an additional interest concession of 5 bps.
Let us help you find the most suitable offers.