Federal Bank Home Loan Interest Rates Starting 7.65% p.a.

Q: What types of rates of interest does Federal Bank offer on its Home Loans?

Federal Bank has three types of rates on offer: Floating rate of interest - The rates fluctuate along with the change in the MCLR A fixed-rate of interest - The rates remain fixed for the entire loan tenure Hybrid rates - The rates remain fixed for a specific period following which it converts to a floating rate structure.

Q: How does the floating rate affect the individual Home Loan interest rate?

Every Home Loan comes with a contracted Home Loan interest rate and a reset clause. The changes in the MCLR do not affect the Home Loan interest rate immediately. The Home Loan interest rate changes only at the time of resetting the MCLR as defined in the contract.

Q: Does it entail that individual Home Loan borrowers have varying rates of interest?

Yes, the rate changes apply to new borrowers only. Existing borrowers continue in the old rate structure until the pre-determined MCLR resetting date. Therefore, borrowers have varying rates of interest on Home Loans.

Q: What factors affect individual Home Loan interest rates?

In the Federal Bank, the occupation of the borrower and the amount of loan are the two factors that influence the individual Home Loan interest rates.

Q: How does Federal Bank treat the repayment schedule in the case of a variation in the interest rate?

Federal Bank changes the repayment tenure of the Home Loan by keeping the EMI constant. However, the Bank reserves the right to alter the EMI amount if it is not in a position to change the tenure.

Q: How does it benefit the customer if the EMI does not change?

In the case of a reduction in the interest, the tenure reduces. Thus, the loan gets liquidated quickly. If the interest rates move up, Federal Bank increases the mandate. Accordingly, your monthly outgo does not change. Therefore, it does not affect your budget.

Q: Has Federal Bank switched to a repo rate linked interest rate structure?

Federal Bank has announced its intentions to link its retail loan products with the repo rates. However, it has not announced any new products until date. Federal Bank has, in the meanwhile, linked its savings accounts rate with the repo rates. The linkage to the loan products is also expected soon.

Q: How will the repo rate linked interest rate help the customers?

As on date, Federal Bank follows the MCLR structure. The MCLR has reduced in recent times. However, the benefits of the reduction do not pass on to existing customers until it is time to reset the MCLR rates. The resetting frequency in Federal Bank is six months. Therefore, the benefits will be available after six months. It is not so in the case of the RLLR-linked rates. The reset takes effect from the first day of the month following the change in the RLLR. Hence, it is beneficial. However, RLLR can also go up. Under such circumstances, it can be disadvantageous to the borrower.

Q: Can the borrower switch over from the MCLR to the RLLR-linked rate after its introduction?

Initially, the RLLR-linked rates will be available to new customers alone. However, Federal Bank could offer an option to its existing MCLR-linked customers to switch over to the RLLR-linked structure.

Q: Which is the better option, the MCLR or the RLLR?

It depends on how the market rates mode. If the market rates show a downward trend, the RLLR is beneficial because the benefits pass on to the customer immediately. On the other hand, if the rates move upward, the MCLR can be beneficial because the upward revision will not take effect until the next reset date.

Federal Bank Home Loans

Federal Bank has loan products for every sector of society. It has some of the best loan schemes for small and medium enterprises. At the same time, it provides one of the best services to the retail sector. The retail advances portfolio of the bank includes education loans, gold loans, personal loans, Home Loans, and many others.

Federal Bank has one of the best interest rate structures among all commercial banks in India. The Bank has a dominant presence in the smaller towns in the southern states of Kerala and Tamilnad. Thus, it is an active lender in PMAY, especially in the southern states of India.

Additional Info: Also check Rs. 1 Crore Home Loan EMI

Federal Bank Home Loans - Features and Benefits

Federal Bank offers Home Loans to meet the housing requirements of all sections of society.

Federal Housing Loan

Purpose of the loan

Construction/purchase of a new house or apartment
Purchase existing house or flat
Repairs, renovations, home extensions, improvements, furnishing, and beautification.
Reimbursement of debt incurred for constructing/purchase of a house
Balance takeover from other banks and financial institutions
Balance takeover from other banks and financial institutions

Target group

Salaried individuals
Self-employed persons and professionals
Businesspersons can also apply for Federal Housing Loan
Non-resident Indians are also eligible for Federal Bank Home Loan

Quantum of loan

Up to 85% of the cost of the project
Loans up to Rs. 15 Crores with the margin 15% to 20%

Loan tenure

Flexible repayment tenure extending to 30 years

Rate of interest

Floating rate of interest linked to 6M-MCLR

Loans for Purchasing Plots

Purpose of the loan

Purchasing a residential plot of land

Target group

Same as that of Federal Housing Loan

Quantum of loan

The maximum borrowing under this category is 25 Lakhs, with a margin of 40%.

Loan tenure

Flexible repayment tenure extending to 60 months

Rate of interest

Floating rate of interest linked to 6M-MCLR

House-Warming Loan

Besides housing loans and loans for purchasing plots, Federal Bank has a unique product, House-Warming Loan.
It is a personal loan without security to meet expenses related to house-warming ceremonies
The quantum of loan is 5% of the Home Loan amount subject to a maximum of 2 Lakhs
The rate of interest on such house-warming loans is 2% over the current Home Loan interest rate.
The loan tenure should not exceed 60 months

Additional Reading: CIBIL Score Required for Home Loan

Federal Bank Home Loan Interest Rates

Federal Bank adopts the MCLR interest rate structure for pricing its Home Loans and other retail loans. Federal Bank is one of the private sector banks to link its retail loans with an external benchmark rate. However, it has not announced any new retail loan product related to the repo rates. As on date, the MCLR interest rate structure continues to be effective.

MCLR is itself an external benchmark-related rate. It does not specifically link to any external rate like the repo rate or the T-bill rate. However, it is subject to market rate fluctuations.

MCLR comprises of four components:

Marginal Cost of Funds
Tenor Premium
Operating Cost
Negative CRR Carry

Federal Bank announces its MCLR at monthly intervals as stipulated by Reserve Bank of India. The housing loan interest rates and other lending rates are linked to the MCLR of the Bank. Any change in the market rate brings about a variation in the MCLR. The housing loan interest rates also move in a similar direction. However, the fluctuations do not affect the current Home Loan rates immediately because of the reset clause. Every Home Loan comes with an MCLR resetting clause. The individual Home Loan interest rates change only when the MCLR is reset. The resetting happens at fixed pre-determined intervals.

The MCLR rate structure is effective from April 01, 2016. The current MCLR of Federal Bank is valid from September 16, 2019.

Tenor	Overnight MCLR	One-month MCLR	Three-months MCLR	Six-months MCLR	One-year MCLR
MCLR	8.55%	8.65%	8.80%	8.90%	9.00%

The individual Home Loan interest rates with effect from September 16, 2019, are as hereunder.

Home Loan Product	Salaried Category		Non-salaried Borrowers
	Rate of Interest	Effective Rate	Rate of Interest	Effective Rate
Housing Loan up to 30 Lakhs	6M-MCLR	8.90%	6M-MCLR + 0.05%	8.95%
Above 30 Lakhs <= 75 Lakhs	6M-MCLR + 0.10%	9.00%	6M-MCLR + 0.15%	9.05%
Above 75 Lakhs	6M-MCLR + 0.15%	9.05%	6M-MCLR + 0.20%	9.10%
House-Warming Loan	HL rates + 2%	10.90%	HL rates + 2%	10.95%

Federal Bank Home Loan Interest Rates - Points to Note

Federal Bank offers a floating rate of interest on its MCLR-linked interest rate loans
The MCLR-linked rates apply to new loans sanctioned after the effective date. Existing loans continue with the contracted rate of interest until the MCLR reset date.
Existing loans sanctioned before April 2016 follow the Base Rate or BPLR, as the case may be
Borrowers can opt to switch over to the MCLR structure at any time
Federal Bank has Home Loans with a fixed rate of interest sanctioned in the Base Rate and BPLR regimes. The borrower can change over to the floating rate structure any time on the payment of a conversion fee.
PMAY Home Loans have the same interest rate structure as listed above
Federal Bank Home Loan Charges

Federal Bank Home Loan Charges

Type of Charge	Amount of Charges
Processing fee	0.50% of the sanctioned limit with a minimum of 3,000 and a maximum of 7,500
Prepayment charges	Floating rate loans
	Individuals: Nil
	Non-individuals: 3% of the balance outstanding
	Fixed-rate Loans: 3% on the outstanding balance amount
	Overdraft accounts: 3% of the unpaid balance amount or Drawing Power whichever is higher.
	Hybrid rate loans
	Floating rate period: No charges for individuals and 3% of the balance outstanding for non-individuals.
	Fixed-Rate period: 3% of the outstanding balance amount
Delayed payment penalty	2% per month for the default amount for the delayed period
	Additional penal interest applicable for SMA category
Conversion fee	0.25% of the balance outstanding or Drawing power whichever is higher
Charges for CIBIL Report and CERSAI	Nil

Federal Bank Home Loans - EMI Calculation

Customers can use the EMI Calculator provided on the Federal Bank website to determine their Home Loan EMI. MyMoneyMantra.com has a similar EMI Calculator on its website. Using the calculator is easy.

Access our website, MyMoneyMantra.com
Select Financial Tools
Choose Home EMI Calculator
Enter the loan amount, rate of interest, and repayment period to get your EMI

Federal Bank Home Loan - Method of Repayment

Federal Bank calculates interest on the daily reducing balances as do all other commercial banks. The different modes of repayment available to Federal Bank customers and other bank customers are as follows:

Post-dated cheques from the respective savings or current accounts of the borrowers
Federal Bank customers can submit a Standing Instruction to the Bank to recover the Home Loan instalment from their savings/current account.
Other bank customers can register ECS mandates for the recovery of the Home Loan instalments on the due dates.
Internet banking and mobile banking features are available with all banks to enable smooth transfer of funds from one account to the other.
The conventional mode of payment includes paying cash at Federal Bank counters

Additional Reading: How to increase CIBIL score?

Federal Bank Home Loan - PMAY

Federal Bank has an active PMAY portfolio, as it has a prominent base in South India. PMAY Home Loans are similar to the conventional Home Loans save for the upfront subsidy factor and specific eligibility norms.

Eligibility Criteria - Income-based

Category of borrower	Annual family income from all sources
Economically Weaker Section - EWS	Not exceeding 3 Lakhs
Low-Income Group - LIG	More than 3 Lakhs and <= 6 Lakhs
Middle-Income Group-I - MIG-I	More than 6 Lakhs and <= 12 Lakhs
Middle-Income Group-II - MIG-II	Above 12 Lakhs and <= 18 Lakhs

Subsidy Criteria

Category of Borrower	Maximum Loan amount eligible for PMAY support	The maximum grant from the Government
EWS/LIG	6 Lakhs	2.67 Lakhs
MIG-I	9 Lakhs	2.35 Lakhs
MIG-II	12 Lakhs	2.30 Lakhs

Federal Bank Home Loan - PMAY - Points to Note

PMAY subsidy is available to all eligible PMAY borrowers
The family comprises of husband, wife, and unmarried children
The subsidy is an upfront interest subsidy that is credited to the Home Loan immediately
The Home Loan EMI changes with the crediting of subsidy into the account
The rate of interest on PMAY loan is the same as that of other housing loans
There are no ceilings on the amount of loan you can avail in PMAY. The amounts above the cap mentioned above are unsubsidised loans.

First-Time Buyer’s Guide on Home Loan Interest Rates, Credit Score, etc

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Federal Bank Home Loan Interest Rates FAQs

What types of rates of interest does Federal Bank offer on its Home Loans?

Federal Bank has three types of rates on offer:

Floating rate of interest - The rates fluctuate along with the change in the MCLR
A fixed-rate of interest - The rates remain fixed for the entire loan tenure
Hybrid rates - The rates remain fixed for a specific period following which it converts to a floating rate structure.

How does the floating rate affect the individual Home Loan interest rate?

Every Home Loan comes with a contracted Home Loan interest rate and a reset clause. The changes in the MCLR do not affect the Home Loan interest rate immediately. The Home Loan interest rate changes only at the time of resetting the MCLR as defined in the contract.

Does it entail that individual Home Loan borrowers have varying rates of interest?

Yes, the rate changes apply to new borrowers only. Existing borrowers continue in the old rate structure until the pre-determined MCLR resetting date. Therefore, borrowers have varying rates of interest on Home Loans.

What factors affect individual Home Loan interest rates?

In the Federal Bank, the occupation of the borrower and the amount of loan are the two factors that influence the individual Home Loan interest rates.

How does Federal Bank treat the repayment schedule in the case of a variation in the interest rate?

Federal Bank changes the repayment tenure of the Home Loan by keeping the EMI constant. However, the Bank reserves the right to alter the EMI amount if it is not in a position to change the tenure.

How does it benefit the customer if the EMI does not change?

In the case of a reduction in the interest, the tenure reduces. Thus, the loan gets liquidated quickly. If the interest rates move up, Federal Bank increases the mandate. Accordingly, your monthly outgo does not change. Therefore, it does not affect your budget.

Has Federal Bank switched to a repo rate linked interest rate structure?

Federal Bank has announced its intentions to link its retail loan products with the repo rates. However, it has not announced any new products until date. Federal Bank has, in the meanwhile, linked its savings accounts rate with the repo rates. The linkage to the loan products is also expected soon.

How will the repo rate linked interest rate help the customers?

As on date, Federal Bank follows the MCLR structure. The MCLR has reduced in recent times. However, the benefits of the reduction do not pass on to existing customers until it is time to reset the MCLR rates. The resetting frequency in Federal Bank is six months. Therefore, the benefits will be available after six months. It is not so in the case of the RLLR-linked rates. The reset takes effect from the first day of the month following the change in the RLLR. Hence, it is beneficial. However, RLLR can also go up. Under such circumstances, it can be disadvantageous to the borrower.

Can the borrower switch over from the MCLR to the RLLR-linked rate after its introduction?

Initially, the RLLR-linked rates will be available to new customers alone. However, Federal Bank could offer an option to its existing MCLR-linked customers to switch over to the RLLR-linked structure.

Which is the better option, the MCLR or the RLLR?

It depends on how the market rates mode. If the market rates show a downward trend, the RLLR is beneficial because the benefits pass on to the customer immediately. On the other hand, if the rates move upward, the MCLR can be beneficial because the upward revision will not take effect until the next reset date.

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