From the borrower's perspective, home loan interest rates are a critical component of a home loan obtaining decision, and that's why the banks offer plenty of different interest rates to attract the borrowers. Still, one must understand the advantages and disadvantages before making any plan.
Home Loan Rate of interest calculation?
The Home Loan Rate of interest formula helps to understand the amount you have
paid for a home loan taken and the amount of interest paid against it. The home loan rate of
interest can be calculated in two different ways one is the Simple rate of interest, the
formula mentioned below
Home Loan Interest Rate = (Home loan rate of interest × 100)/(Loan Amount ×
tenor)
The Second way is compound interest, Formula mentioned below
Compounded Interest Rate = P (1+R) T – P
Were,
• P = Principal amount
• R = Rate of interest
• T = Tenor
Let's understand with a few examples:
Example: If Praveen has given Rs 10000 to his friend and received 12000 after
one year. Find
at what interest rate did Praveen has given the amount to his friend by using the interest
rate calculation formula?
Solution:
Principal amount = Rs 10000(given)
Simple interest =Rs 12000- Rs 10000= 2000
Time = 1 year
Using interest rate formula,
Interest Rate = (Simple rate of Interest × 100)/(Principal Amt × Tenor)
Interest Rate = (2000 × 100)/(10000 × 1)
Interest Rate = 20%
i.e., Praveen will take a 20% rate of interest from his friend.
Before applying for the home loan, studying various banks' interest rates is considered
competent
because then you have a calculated decision for obtaining the home loan.
Now, how to compare interest rates?
By going to banks?
No, and even if you do, how inconvenient you will be.
To solve your problem, loans4you.in are available at your service, a neutral marketplace for
comparing different interest rates of multiple banks and helps you choose the most
convenient deal for you.
• Different type of Rate
of interest:
An Important component and deciding factor in any home Loan is the Rate of interest. There
are
different types of Rate of interest available in the market and before deciding on the rate
you should understand advantages and disadvantage. So understanding the type of home loan
interest
rate and how to take benefit from it.
• Floating rate of
Interest………. Its advantages and disadvantages
As the name suggests FLOATING Rates, Rate of Interest is not fixed, and its changes time to
time by bank. Is depend on Reference rate i.e. base rate of Bank and BPLR of NBFC.RBI
normally reviews its policy quarterly, based on India’s economic situation. There can be a
situation that RBI increases the Repo and Reverse repo rates but bank/HFC can stick to the
present rate or can increase the Reference rate leading to the increase in ROI of the Home
loan customer and vice a versa RBI decreases the Repo and Reverse repo rates but bank/HFC
can stick to the present rate or can decrease the Reference rate leading to the decrease in
ROI of the Home loan customer. Maximum customer opts of Floating Rate of Interest in the
present scenario.
• Fixed rate of
Interest………. Its advantages and disadvantages
Fixed rate home loans offered by banks in India are fixed for the entire tenure of the loan.
Fixed rate home loans are at least 1% to 2% higher than the floating rate home loan. In
fixed interest rates benefit is there rate of interest remain fixed in spite of increase
rate of interest in the market. Disadvantage is that their rates are 1% to 2% higher than
the floating rate and in spite of decrease in rate they don’t get benefit of it
• Fixed Plus Floating rate
of Interest………. Its advantages and disadvantages
It is the combination of fixed and floating rate of interest i.e. for initial period rate
are fixed and after that it switches to floating rate of interest:
For Example: For the loan amount of 20 lacs for 20 years for first two years
they offer fixed rate of 8 % and after that it switches to Floating rate of interest. We
need to be careful while choosing as bank/HFC give lower rate but after completion of fixed
tenor they increase the floating rate very high
Bank Name | Processing Fee | Prepayment Charges |
---|---|---|
SBI Home Loan | 0.35% of loan amount + GST, Nil for Govt. Employees | Nil |
HDFC Home Loan | Up to 1.25% of the loan amount or ₹ 3,000 whichever is higher, plus applicable taxes | Nil |
ICICI Bank Home Loan | Flat Rs 3000 /- + AT | N.A. |
Axis Bank | Up to 1% of the Loan amount subject to minimum of Rs.10,000/- | Nil |
PNB Housing Finance | 0.50% Or 10,000 + GST , whichever is higher. | Nil |
Bajaj Home Finance | 0.50% Or 10,000 + GST , whichever is higher. | Nil |
IDFC First Bank | 0.20% + 18% GST | |
IndiaBulls | 0.50% to 1.00% + GST | Nil |
Tata Capital Home Finance | 0.50% to 1.00% + GST | Nil |
Equitas | Up to 1% of the Loan amount subject to minimum of Rs.10,000/- | Nil |
Standard Chartered | Rs.10000 + GST | Nil |
Home loan interest rates as per loan amount
There are varied direct & indirect factors that determine your loan amount, and these are:
Direct Factors:-
• Loan to value ratio
• Credit score
Indirect Factors:-
• Overall country's economic
situation
• Inflation
Factors affecting your home loan interest rates
Multiple factors affect the home loan rate of interests; in which some are fixed, such as
MCLR & Repo rates, while others are variable such as:
Property Location:
If the property is located in a prime location & has all the facilities, it will have higher
home loan
interest rates and vice versa.
Loan Tenor:
If the property is located in a prime location & has all the facilities, it will have higher
home loan
interest rates and vice versa.
Occupation:
The home loan rate of interest for salaried: The salaried individuals like government
employees, CAs,
doctors, or people with stable incomes are offered lower interest rates due to security.
The home loan rate of interest for SENP: This includes businessman which usually asks for a
higher loan
amount. However, the rule remains the same, stable income with comparatively lower home loan
interest
rates.
The SENP individuals with a credit score of 800 are usually offered interest from 6.7% to
7.24%.
Interest types:
If you have opted for home loan floating interest rates, your EMI amount will vary depending
on the
RBI norms, or if you have chosen fixed interest rates, your EMI will be fixed. Or, if you
have selected fixed + floating interest rates, your EMI will be fixed for a period & then it
will float.
Credit score:
The lower the credit score, the higher will be the interest rates because the credit score
shows your financial capability to repay the loan. So, the lender will charge you more to
cover the risks involved.
The heavier home loan EMIs put a lot of pressure on the borrower and imbalance its monthly
budget, and it mainly occurs due to inattentive behaviour while obtaining the home loan. So,
one
of the practical solutions to reduce your EMIs is by lowering the home loan rate of interest
& which can be achieved in the following ways:
• Pay a heavier down payment
• Opt for prepayments
• Opt for a home loan balance transfer facility
• Compare the interest rates online via loans4you.in and hunt for better deals.
• Willingly ask for a shorter home loan period
• Increase your EMI (not recommended)
For availing of the facility, follow the below-given instructions:
• Go to our website loans4you.in
• Click on the home loan EMI calculator
• Enter loan amount & loan tenor
• The answer will be your payable interest rate.
The Home loan eligibility calculator will tell you the amount of money you can borrow by entering home loan Gross monthly, home loan tenor, home loan interest rate and other monthly EMIs (if they exist). You will get two answers: home loan eligibility means the money you can borrow, and the second is the monthly EMI.
It will tell you about your home loan affordability if you enter down payment, home loan tenor, home loan gross income,home loan interest rate, other EMIs. The answer will be your home loan affordability.
It is the % of the principal amount charged by the bank for using that amount.
The lowest home loan interest rate is 6.55%, offered by Kotak Mahindra Bank.
There are three types of home loan interest rates in India: fixed, floating, and fixed + floating rate of interest.
You can lower your current home loan interest rate by availing home loan balance transfer facility