Home Loan Interest rates for all Banks 2020

Note : The interest rate is subject to change at the lender’s discretion or according to RBI directives.

Home loan interest is a key determining factor for the total cost you incur on a home loan. Therefore choosing it wisely is important; a low interest home loan with certain additional benefits will serve as a winning deal for you in the long run. Have a Fincity financial advisor ensure that you get the best home loan possible and further help you until you actually procure the loan. In case you’re curious, know all about other home loan fees and charges. Fees and charges

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Interest Rate Variants

There are essentially two types of home loan interest rates that people can choose from: floating and fixed.

Fixed Interest Rate

With this variant of interest rate, your interest rate and EMI remain constant throughout the entire loan tenure. Lenders however do allow borrowers to shift their home loan to floating or variable interest rates if they wish to, but only after a specific amount of time has passed.

Floating Interest Rate

This type of interest rate is influenced by the current financial market conditions and fluctuates based on changes in lending rates decided by the bank. It is broadly affected by factors such as revised MCLR, RBI’s financial policies and other benchmark rates. Know the difference between Floating & Fixed Rate of Interest in detail.

 

Experienced a change in interest and want to calculate the new EMI or interest? Use Fincity Home Loan EMI calculator that breaks down the principal and interest components of your new EMI.

How is Floating Interest Rate Calculated?

Lenders follow a formula that adds the external benchmark rate (example: repo rate, 3 month treasury bill rate, etc) with a given spread.

Effective Home Loan Interest Rate = Base Rate + Spread/Markup

External Benchmark Rate

This is also known as the base rate and is the minimum rate that’s set by the Reserve Bank of India (RBI). It is connected to RBI’s repo rate or any other benchmark interest rate that the Financial Benchmarks India Private Limited (FBIL) publishes. This may change depending on various elements and a lender cannot offer loans below this rate.

Factors that Impact Home Loan Interest Rate

Certain factors that influence your home loan interest rate are

Credit Score

This element goes into deciding the markup component of the effective interest rate and is added to the benchmark rate. If your credit score is high, it leads to a low interest rate and the opposite applies to the reverse scenario.

Home Loan Type

The interest rate is also determined by the type of home loan you’re opting for – whether it’s a plot loan, NRI home loan or a regular home loan. Often the first two come with a higher rate than a regular home loan.

Accessing a Home Loan at the Lowest Interest Rate

Although no action will guarantee that you will get the lowest home loan interest rate, there are certain practices people follow to help avail the lowest interest rate possible.

Try to Keep a High Credit Score (Close to 900)

This score reflects your creditworthiness and for the lender it shows how responsibly you’ve paid off previous loans. A borrower with a low credit score will pay a higher interest rate than someone with a higher score. Generally a score of 760 and above is considered pretty good.

Make a Higher Down Payment

Since a higher loan amount leads to a higher interest rate, it’s advisable to make a sizable down payment and bring down the amount you borrow.

Tax Deductions on Interest Paid

Besides the deduction of up to Rs.1.5 lakhs per year on principal amount repaid (under Section 80C of the Income Tax Act, 1961), you’re also eligible to claim a deduction of up to Rs.2 lakhs per year on the interest paid on the home loan (under Section 24).