Interest Rates on Home Loans

• Floating Rate Loans:- The floating interest rate, also known as the variable rate of interest, is subject to current market lending rates and, as a result, may vary over the loan term. The EMIs on a house loan will rise or fall in response to changes in interest rates. With the present trend of reducing home loan rates, prospective home loan borrowers will benefit from applying for house loans with a flexible rate of interest.
• Fixed-Rate Loans:- The fixed interest rate remains consistent throughout the loan tenure, resulting in a steady home loan EMI. When the present house loan rate of interest is fairly low and a rising trend is projected in the future, applying for a home loan at a fixed rate of interest is preferable. However, given the present trend of reducing lending rates, banks provide consumers the option of switching to variable/floating home loan interest rates after completing a set time period.
• Hybrid Loans:- Hybrid rate mortgages are a combination of fixed and variable rate mortgages. They will have a fixed interest rate for a defined length of time before switching to a fluctuating rate of interest. Such mortgages are best suited for customers who obtained the loan at a low fixed rate and intend to prepay or foreclose before the variable rate kicks in.

How can I receive a low-interest house loan?

Because house loans are often large in size, banks and HFCs conduct a comprehensive and extensive examination of the borrower's credit history, repayment ability, and income, as well as severe checks on the property to be acquired. Borrowers seeking a house loan must be aware of the variables lenders consider when processing a home loan application, as well as be fully informed of their personal eligibility. It should be noted that low-interest rates are frequently accompanied by stringent qualifying requirements. The following are the elements that lenders consider when determining your eligibility for a home loan and the interest rate that will be offered:

• Loan amount: The loan amount you wish to borrow might also have an impact on the interest rate you receive on your home loan. Home loans up to Rs. 30 lakh often offer cheaper interest rates than larger home loans. To receive a better interest rate on your house loan, attempt to make the largest down payment feasible. This will not only minimize the total debt load, but it may also help them achieve a cheaper interest rate on their loan.
• Income and employment: Another important criterion that lenders consider is your salary, kind of work, and employer profile. Home Loan candidates working for the government or PSUs, as well as those working for large and/or reputable private sector enterprises, are frequently favoured by lenders because to their better job/income certainty. As a result, lenders provide cheaper home interest rates to such individuals. On the other hand, if you are self-employed with inconsistent revenue flows, have an unsteady work profile, or have just begun your professional adventure, obtaining a Home Loan at a reduced interest rate may be challenging.
• Credit score: Your credit score is a number that represents your credit history. Those with a solid credit score have paid their EMIs and credit card payments in full and on time, and have not been too reliant on credit in the past. Lenders will consider you for a house loan if your credit score from CIBIL and other bureaus is 750 or above. Furthermore, banks and HFCs are increasingly considering house loan applicants' credit scores to determine home loan interest rates. Because a good credit score demonstrates prudent credit behavior and financial discipline, many banks and HFCs offer lower-interest home loans to candidates with better credit scores. Please keep in mind that if the home is co-owned, the lender will most likely verify the credit score of each owner, even if the loan is taken out by a single co-owner.
• External benchmark rate: According to the RBI's notification, housing loan interest rates sanctioned by banks beginning in October 2019 will be linked to external benchmark rates such as the RBI Policy Repo Rate, Government of India 3-Month and 6-Month Treasury Bill yields published by Financial Benchmarks India Private Ltd (FBIL), and any other benchmark market interest rate published by FBIL. Any change in the external benchmark rate would affect the home loan interest rate of all banks in India under the new system.
• Type of home loan: The interest rate on a house loan varies depending on the kind of loan. Regular house loans have normal interest rates, whereas Plot Loans and NRI Home Loans typically have higher interest rates.
• Type of interest rate: There are two types of home loan interest rates: fixed and variable. The interest rate you select for your home loan will impact the rate at which you repay your lender. In the case of fixed-rate house loans, EMIs stay constant throughout the loan term. Floating rates, on the other hand, fluctuate in response to changes in the lending rate, such as the Repo Linked Lending Rate (RLLR). Lenders often charge higher interest rates on fixed-rate house loans due to the increased interest rate risk inherent with fixed-rate home loans.
• The lesser interest rate for women home loan borrowers: Most banks provide women customers home loan concessions, often a 0.5 percent lower interest rate. As a result, married couples may consider taking out a combined house loan and making the woman the principal applicant if they can achieve a cheaper interest rate. Obtaining a shared home loan will also boost your home loan eligibility and tax benefits.

Which bank has the lowest interest rate on house loans?

Union Bank of India, Bandhan Bank, and Bank of Maharashtra provide house loans with the lowest interest rates in India, beginning at 6.50 percent per annum, which is now the best home loan interest rate in India. Following these institutions are Bank of Baroda and Kotak Mahindra Bank, which are now offering house loans with interest rates beginning at 6.50 percent and 6.55 percent per annum, respectively. LIC Housing Finance, State Bank of India, HDFC Ltd., ICICI Bank, and Bajaj Finserv are among other lenders that provide low-interest house loans.

Though interest rates given by banks might change at any time, the Union Bank of India now offers the lowest home loan interest rate of 6.40 percent p.a. to its clients. It should be noted, however, that this rate applies solely to house loans for women applicants.