## Home Loan Interest Rates

In India, home loan interest rates start from 6.70% p.a. Borrowers meeting all the home loan eligibility conditions are offered the home loan at the lowest rate of interest. Lower the home loan interest rate, lower is the home loan EMI and the overall cost of the loan. Fixed and floating interest rate options further add to the convenience.

## Lowest interest rate on Home Loan

Currently, Citibank Home Loan and Kotak Mahindra Bank Home Loan are available at the lowest interest rate starting at 6.70% p.a. Other leading banks offering low home loan rates are SBI, HDFC, and ICICI. As current housing loan interest rate are at decadal low, you can seal the best housing finance deal ever this year from a lender of your choice.

## Home Loan Details

Below are some common home loan details of various housing loan offers offered by different banks and other financial institutions:

## How to Calculate Interest on Home Loan?

Calculate Home Loan EMI using MyMoneyMantra Home Loan Calculator. It is simple, free and convenient to use EMI Calculator for estimating monthly installments. All you need to do is share the loan amount, tenure and rate of interest and the Calculator will instantly share EMI for your home loan.

Simple steps to calculate home loan EMI & interest amount are:

Step 1: Click on MyMoneyMantra Home Loan Calculator.

Step 2: Share home loan amount, housing loan interest rates and tenure.

Step 3: Submit these loan parameters and instantly get Loan EMI & interest rate cost.

Completing these steps you will get:

• EMI
• Total interest payable
• Total amount payable
• Amortization Schedule for loan

Calculating your loan’s EMI is thus instant and hassle free at MyMoneyMantra Platform. Furthermore, you need not visit each bank’s website separately to know about loan terms or EMI calculations. You can try different combinations and choose the most affordable one according to your pocket.

You should also know about mathematical EMI Calculation.

Home Loan EMI Calculation Formula:

EMI= [P x R x (1+R) ^ N]/ [(1+R) ^ N-1]

Here, EMI is Equated Monthly Instalment

P is Principal Amount (Loan Amount)

R is effective rate of interest

Home loan interest rate in all banks are calculated on an annual basis. To calculate monthly home loan rate, divide annual rate by 12

For example, if the applicable home loan interest rate is 8%, your monthly interest would be 0.0066 (0.08/12 = 0.0066)

N – Loan tenure in months (EMIs to be paid)

So, if it is a 15-year home loan, N = 15×12 = 180

## Types of Home Loan Interest Rates Available

A home loan can be availed of as a fixed rate loan or a floating/ variable rate variant. However, currently maximum lenders in India are offering floating home loan schemes only.

• Fixed interest rate - As the name suggests, fixed interest rate of home loan results in fixed EMIs through the tenure. You can plan the budget for the entire tenure of the loan and thus there is no fear of escalating EMIs ever. However, this peace of mind comes at a higher cost than the floating rate interest. There is also a charge on foreclosure or prepayment of a fixed home loan.
• Floating/ variable Home Loan - In this,  interest rate changes as per fluctuations in benchmark lending rates. With change in any of the external benchmarks such as Treasury Bill yields or repo rates, your bank will also change your home interest rates and thus your EMI will adjust accordingly. However variable rate of interest is lower than fixed interest and there are no foreclosure or prepayment charges.

Some banks also offer combination schemes wherein the loan switches to a floating rate after initial few years. Based on your current repayment capacity and market situation choose the loan regime.

Check for 25 lakh home loan EMI and apply easily on MyMoneyMantra.

## Factors That Affect Home Loan Interest Rate

A home loan is a secured loan. Key factors that affect home loan interest rate are your age, income, existing debt to income ratio, loan amount, interest rate regime, loan tenure and credit score.

• Type of Interest: The fixed rate of interest is 100 to 200 bps more expensive than floating rate. Thus the type of interest you choose will also determine your final rate for home loan.
• Loan-to-Value (LTV): LTV is percentage of property value that you avail of as loan. The rate of interest will vary as per the loan amount. A larger quantum will entail higher rate as credit risk increases with higher LTV.
• Credit Score: Your credit score helps lender assess credit risk of your profile. So it is recommended to maintain a fair score above 600 to avail of a home loan. Being a secured loan, credit score requirement is not as high as in case of a personal loan.
• Property location: The property location impacts the market value and resale value of the property. Thus, the lender will charge a lower rate for a property located in an upbeat area.
• Job / income continuity:  Borrowers with stable income are eligible for lower rates. Most lenders will offer better deals to applicants who are salaried professionals, or working with PSUs and government employees, and leading Corporates/ private sector firms. Some lenders offer special offers to specialised professionals such as Doctors and chartered accountants.
• Loan Tenure: Loan duration or tenure is another factor that impacts the rate. If you opt for shorter tenure, your overall interest cost will be lowered.
• External benchmark lending rates: Since Oct 2019, floating rate home loans are linked to external benchmarks such as repo rate, yield on three-month or six-month treasury bills, or any other benchmark rate released by FBIL i.e. Financial Benchmarks India Pvt. Ltd. Based on this benchmark rate and customers’ risk premium the banks can transparently calculate effective rate of interest. With change in the benchmark rate, the effective rate will also fluctuate in a maximum of three months.

## Example of Flat Rate & Reducing Balance Method of Interest Calculation

To understand mathematics behind your home loan EMI you must understand the difference between Flat Rate and Reducing Balance Rate Calculations. Opting for reducing balance method can save your more money as against the flat rate, on the same interest rate home loan deal.

How? Let’s understand with the help of an example:

In flat rate method, the interest on home loan is calculated on the loan principal amount each month and thus EMIs are same during the tenure of loan. However, on reducing balance method, the interest rate will reduce each month/ EMI cycle. The calculation for instalment is made on the balance amount of principal after deducting the repaid principal amount. So reducing rate method is more affordable than flat rate method for the borrowers.

Let’s say, Mr A takes a Home Loan of Rs. 10, 00,000 at 10% p.a. for 10 years.  Here is how interest rate calculations will vary:

## How to Calculate Effective House Loan Rate of Interest?

The effective housing loan interest rate is assessed according to external and internal factors. The internal factors determine the lender's credit policy that helps in setting out parameters for calculating customers’ risk premium and repayment capacity. While external factors are net income, debt to income ratio, credit score and collateral value. Basis these factors, the lender will calculate effective interest for home loan.

## How to Get Lowest Home Loan Rates in India?

To get the lowest home loan rate offer by the lender you should ensure that you score high on each of the requisite parameters for home loan eligibility. Some of the factors that require attention include:

• Compare available offers: First up, you must compare the top offers available in the market. You should compare various parameters of the loan deals on the basis of LTV, rate of interest, tenure, fee & charges, EMI structure etc. Opt for the option that is easy on your pocket. Compare best home loan rates and EMI difference using the calculator.
• Analyse overall cost of loan: Compare processing fees, administrative charges, penal charges and other fees & costs mentioned by the lender. Do not restrict loan comparison to interest rates only. Try to make an informed decision here.
• Know factors that improve your eligibility: Further work on your profile to get the best offer. For example, opting for lower LTV or lower tenure will improve the rate quote by the lender. Likewise, your existing debt to loan ratio impacts the rate of interest. Keep FOIR low and you will be offered a better deal by the lender.
• Use professional help: Your past relationship with lender also helps you avail of the low rate of interest. Besides if you could negotiate well, you can easily get some discount on the effective rate. A professional advisor can help you grab the best rate. They can negotiate on your part and ensure the best possible rate.

## How to Reduce Home Loan Interest Rate Burden?

Home loan is a long term commitment that runs for several years. Though maximum loan tenure range is usually up to 30 years, most borrowers take 10-15 years to pay their loans. The smaller is the tenure, smaller is your interest liability. Thus, one of the best ways to reduce your home loan interest rate burden is to opt for lower loan tenure.

Use any of the following paths to keep burden of current home loan interest rates low:

• Prepay loan amount periodically: Your home loan EMIs are generally calculated on reducing balance method. So every time you repay your loan, the burden of interest reduces on the loan. One of the easiest ways to prepay your loan fast while keeping interest cost low, is pre-paying a fixed sum over & above the instalments at a fixed interval, say after 12 EMIs, each time. This will periodically cut down the loan principal and interest liability, thereby ensuring that your loan is repaid before the tenure. You can also schedule such payment with annual bonus, salary hike, business profits etc.
• Pay higher EMIs: Another method to get the lowest home loan interest rate bank offer is to pay higher EMIs each month. There is no penalty on home loan prepayment and thus prepaying EMIs helps you cut your loan burden.
• Balloon repayment: Continue with the scheduled EMIs & prepay the entire loan when you have surplus funds in hand.
• Opt for balance transfer: Besides prepayment you may also opt for a lower interest rate offer from another lender and apply for best home loan interest rates. This will entail a nominal fee in the process however you can considerably reduce the EMI & interest burden.

### Best Value Home Loans

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## Home Loan Interest Rates FAQs

### ✅ Which Bank has the lowest home loan interest rate?

Currently lowest home loan interest rate offer is available through Kotak Mahindra Bank and Citibank at 6.70% p.a. Other top banks offering minimum home loan interest rate are HDFC, ICICI, Bajaj Finserv & SBI. Home loan interest rates are at lowest levels in the past 15 years. Women borrowers can tap further concessions on the available rates.

### ✅ How to Get Lowest Home Loan Rates in India?

Use professional advice and compare the best deals online to grab the lowest today home loan rate offer. Use EMI Calculator and negotiate for the best rate.

### ✅ What factors do banks consider before approving a Home Loan application?

Factors that affect the home loan approval process include age, income & job/business stability, debt to income ratio, Credit Score, dependants, co borrower’s financial health, LAP etc.

### ✅ What are the minimum and maximum tenure for Home Loans?

Home Loans are available at maximum flexible repayment terms. The tenure can range from 5 years to 30 years. Choose the lowest possible tenure to keep the interest burden low.

### ✅ Can a co-applicant apply for a home loan?

Yes, home loan can be applied by co-applicants jointly. Normally the loan is availed in joint names to increase the loan eligibility. You can avail the loan jointly with spouse, children or parents.

### ✅ Is a balance transfer option available for a Home Loan?

Yes, a balance transfer option is available for a Home Loan. You can avail of current best offers on new home loan interest rate by transferring your ongoing home loan to other bank. It is recommended to transfer a loan in the early years. A loan that has already been served, i.e. max interest liability is already being paid, should not be considered for balance transfer.

### ✅ Is a top-up facility available with Home Loan?

The availability of top up facility will varies as per lender’s policy. However, in most cases, you will be eligible for the top up scheme if you have been regular in repaying your EMIs. The rate of interest on the top-up loan will be slightly higher than the Home Loan (still lower than personal loan), yet the approval & processing will be faster than a fresh loan application. You also get repayment flexibility with top up home loan.