Home Loan Interest Rates

Home Loan Rate of interest

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.

How to calculate home loan rate of interest ?

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.

Why is it important to compare different banks' interest rates?

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.

Type of Home Loan Interest rate

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

Lowest Home loan Rate of interest

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 Rate for SENP

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

Factor affecting your home loan rate of interest

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.

Tips for reducing the home loan interest rates?

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)

Home Loan EMI Calculator

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.

Eligibiltiy Calculator

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.

Balance Transfer Calculator

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.

F.A.Q

  • 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

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