Home Loan Information: How To Apply Home Loan (Interest Rates & Comparison)

Home Loan Information: You can take a home loan for buying, building, repairing and expanding a residential property so that you do not have to break your savings and investments for these tasks. In this, the property is mortgaged with the bank/lending institution till the loan is repaid. Home loan interest rates start from 6.65% p.a. Loan institutions generally allow 75% to 90% of the value of the property being pledged as the loan amount, which can be easily repaid over a repayment tenure of up to 30 years.

 

You also get a host of benefits when you take a home loan like tax benefits, PMAY home loan subsidy up to Rs 2.67 lakh, balance transfer facility and top-up loan. In this article, apart from home loan schemes, we have also given information such as home loan calculator, home loan terms and conditions, home loan subsidy, home loan interest rate and more.

Like other loans, it has become difficult to find the best home loan offer in today’s time. At Paisabazaar.com, we help you compare, select and apply for the best home loan offers from the best banks and Housing Finance Companies (HFCs) in India. You can apply for the best home loan offers on Paisabazaar.com and get e-approval soon.

Home Loan Information

Home Loan Features and Benefits

Home loan information features and benefits vary for different banks or other lending institutions, some of which are:

  • Low Interest Rates: The loan institutions offer the lowest interest rate to make the home loan more affordable.
  • Easy Loan Tenure: The tenure of a home loan is usually up to 30 years, thereby reducing your EMI amount and giving you more time to repay.
  • Annual Tax Benefit: You get exemption in income tax return on paying principal and interest of your home loan under Section 80C, 24B and 80EEA of the Income Tax Act.
  • Interest Subsidy under PMAY: Under the Credit Subsidy Scheme related to Pradhan Mantri Awas Yojana (Urban), the first time home buyer will get Rs. 2.67 lakh on home loan interest. There can be savings of up to
  • Home Bank Transfer Facility: You can transfer your existing home loan to any other bank or loan institution and then repay the same at a lower interest rate than before.
  • Top-up Loan Facility: In top-up loan facility, you borrow an additional amount over and above your existing home loan which you can use for any personal or business needs.

Home Loan Interest Rates

The home loan interest rate starts from 6.65%. This may vary depending on the bank/loan institution and loan schemes. Home loan interest rates depend on several factors such as the credit score of the applicant, loan amount, repayment capacity of the applicant, tenure and etc.

Lending Banks and Institutions Minimum Interest Rate EMI /Lakh** Processing Fee (not including GST*)
Kotak Mahindra Bank 6.65%* ₹ 648 0.25%- 0.5% of the loan amount plus other applicable charges
Union Bank of India 6.80% ₹ 651 0.50% of the loan amount (maximum ₹ 15,000)
Punjab National Bank 6.80% ₹ 651 Full waiver of processing fees and documentation fees under the offer of PNB New Year Bonanza 2021 running from 01.01.2021 to 31.03.2021
Bank Of Baroda 6.75% ₹ 655 0.25% to 0.50% of the loan amount (minimum ₹8,500 and maximum ₹25,000)
Bank of India 6.95% ₹ 655 0.25% of the loan amount (minimum ₹ 1,500 and maximum ₹ 20,000)
Central Bank Of India 6.85% ₹ 655 0.50% of the loan amount (maximum ₹ 20,000)
Axis Bank 6.90% ₹ 659 Up to 1% of the loan amount (minimum ₹ 10,000)
Bajaj Finserv 6.90% ₹ 659

For Employed: Up to 0.80% of the loan amount

For self-employed applicants: up to 1.20% of the loan amount

Canara Bank 6.90% ₹ 659 0.50% (Min. ₹ 1,500 & Maximum ₹ 10,000)
HDFC Bank 6.70% ₹ 659 Up to 0.5% of the loan amount and ₹ 3,000 (whichever is higher)
ICICI Bank 6.70% ₹ 659 0.50% of the loan amount
LIC Housing Finance 6.90% ₹ 659 as applicable
Punjab And Sind Bank 6.55% ₹ 659 Processing fee waived during festival campaign
State Bank Of India 6.70%* ₹ 659 Processing fee waived on approved projects for home buyers
Tata Capital Housing Finance 6.80% ₹ 659 0.20% – 0.50% of the loan amount
UCO Bank 6.90% ₹ 659 0.5% of the loan amount (minimum ₹ 1,500 and maximum ₹ 15,000)
IDBI Bank 6.90% ₹ 659

For Balance Transfer and PMAY applicants: Nil
For other home loan applicants:

For up to ₹ 35 lakh: ₹ 3,500 to ₹ 7,500

For ₹ 35 Lakh to ₹ 75 Lakh: ₹ 6,000 to ₹ 10,000

For ₹ 75 Lakh to ₹ 125 Lakh: ₹ 10,000 to ₹ 16,000

For Above ₹ 125 Lakh: ₹ 10,000 to ₹ 20,000

Indian Overseas Bank 7.05% ₹ 669 Up to 0.50% of the loan amount (maximum ₹ 15,000)
PNB Housing Finance 7.35% ₹ 702 Up to 1% of the loan amount (minimum ₹ 10,000)
Federal bank 7.65% ₹ 709 Up to 0.50% of the loan amount (Minimum ₹10,000; Maximum ₹45,000)
Standard Chartered Bank 7.99% ₹ 733 0.50% to 1% of the loan amount
Grihashakti 7.99% ₹ 733 Up to 3% of the loan amount
Karnataka Bank 8.08% ₹ 738 Up to 0.25% of the loan amount
IIFL 8.45% ₹ 765 Up to 2% of the loan amount
DHFL 8.75% ₹ 786

Employed / Self-employed – Up to 0.5% of the loan amount (Minimum ₹ 2,500)

Self Employed Non-Professionals – Net PAT: 0.5%, Others: 1.0% of the loan amount

Yes Bank 8.85% ₹ 794

2% of the loan amount or ₹ 10,000, whichever is higher

Indiabulls Housing Finance 8.65% ₹ 804 2% of loan amount
Aditya Birla Housing Finance Limited 9.00% ₹ 805 1% of the loan amount
India Shelter Finance Corp Ltd. 12.00% ₹ 1,106 2% – 3% of the loan amount

The home loan interest rates given above are as on 16 March 2021.
The interest rates given in the table are subject to change without any prior notice.

*Discounts on HDFC Home Loan interest rates are valid till March 31, 2021.
*Kotak Mahindra’s special interest rates are valid till 31 March 2021.
* SBI’s special interest rates are valid till 31 March 2021.
* ICICI special interest rates are valid till 31 March 2021.
**The repayment tenure for home loan EMI calculation is assumed to be 30 years.

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Types of Home Loan Interest Rates

Loan institutions offer home loans at fixed interest rates or floating interest rates.

1. Fixed Rate Home Loan: In case of fixed interest rates, the interest rate of the loan remains the same throughout the repayment tenure and hence your loan EMI also remains the same throughout the loan repayment tenure.

Benefit

    • Since the home loan rate remains constant, you will know exactly how much interest you have to pay for the loan, which helps you plan the loan repayment.
    • Again, since the rate remains the same throughout the loan tenure, you are protected even if the bank’s interest rate rises at any point during the loan tenure.

Loss

    • The fixed interest rate is usually higher than the floating rate interest rate by 1 to 2.5%.
    • If the bank’s interest rates fall at any point during the loan tenure, your loan interest rates will remain unchanged, so you will not get the benefit of falling interest rates.

2. Floating Rate Home Loan: In case of floating interest rate, the interest rate on your loan keeps on fluctuating and rising. These interest rates are subject to changes in the benchmark rate as published by the lending institution (such as the repo rate), which is dependent on several factors such as RBI policies and other external factors.

Benefit

    • The floating interest rate home loan is cheaper than the fixed interest rate.
    • As per RBI norms, individuals availing floating rate home loans do not have to pay any prepayment or foreclosure fees.

Loss

    • The only problem with a floating rate home loan is that its EMI changes with the change in the interest rate, which can create a dent in your monthly budget.

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Best 10 Banks In India Offering Lowest Home Loan Interest Rates

Any person taking a home loan would like to take a loan at the lowest interest rates, because the lower the interest rate, the lesser the loan burden will be on you. Following is the list of the main banks offering the lowest interest rate loans in India:

Loan institution Lowest interest rate EMI / Lakh **
Kotak Mahindra Bank 6.65% * ₹ 642
Punjab And Sindh Bank 6.65% ₹ 642
State Bank of India 6.70% * ₹ 645
HDFC Bank 6.70% * ₹ 645
ICICI Bank 6.70% * ₹ 645
Bank Of Baroda 6.75% ₹ 648
Union Bank of India 6.80% ₹ 652
Punjab National Bank 6.80% ₹ 652
Tata Capital Housing Finance 6.80% ₹ 652
Central Bank Of India 6.85% ₹ 655

* To calculate home loan EMI, the loan tenure is assumed to be 30 years.

Note: The interest rates offered by banks, NBFCs and HFCs are subject to change as per RBI instructions and at the discretion of the lenders.

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Home Loan EMI Calculator

Before taking a home loan, if you know its EMI amount, you can plan its repayment plan and avoid future problems. To help you with your home loan EMI calculation, Paisabazaar.com offers a free-of-cost home loan EMI calculator. The home loan calculator is easy to use as you only need to enter the loan amount, interest rate and loan tenure information in the home loan EMI calculator to get accurate results.

Take a look at the following table for how home loan EMI is calculated:

Loan amount Rate of interest EMI for 10-year tenure (₹) EMI for 20-year tenor (₹) EMI (₹) for 30-year tenor
30 lakh 6.70% 34,370 22,721 19,358
50 lakh 7.70% 59,874 40,893 35,648
70 lakh 8.70% 87,540 61,636 54,819
1 crore 9.70% 1,30,495 94,523 85,548

Types Of Bank Loans In India

Home Loan Information Types

Banks and Housing Finance Companies (HFCs) offer home loans for various purposes. So before applying for any type of home loan, assess your needs to get a suitable home loan scheme. Following are the types of home loans:

Loan to buy a home: This loan is the most common home loan which is usually taken for the purchase of ready-to-move-in properties such as construction property and pre-owned house / resold property . As per RBI guidelines, banks/lending institutions can offer loans up to 75%-90% of the property value.

Composite Loan: This loan is for individuals who want to buy a piece of land for investment or for building a house. In this type of home loan, a part of the loan amount is given to the borrower for the purchase of the plot, and when the rest of the loan amount will be transferred depends on the stages of construction of the house.

Home Construction Loan: Home construction loan is available for individuals who want money to build a house. Just like with a composite loan, its repayment amount also depends on the stages of construction of the house.

Loan for Home Renovation: This loan can be given for the repair expenses of an existing house. The interest rate for this loan is similar to that of a normal home loan. However, its loan repayment tenure is shorter than a normal home loan.

Home Extension: This loan is for those who need money to add more space to their home. Under this type of loan, banks/lending institutions usually provide 75-90% of the construction amount and lend based on the LTV ratio.

Bridge Loan: This is a short term home loan and is suitable for individuals who want to sell the existing house and buy a new home. The loan applicant is given the amount that is falling short to buy a new house by selling the old house.

Interest Saver Loan: This is similar to the Home Loan Overdraft facility. In this, the home loan account of the borrowers is linked with their savings bank account. Any amount deposited in that savings bank account in excess of the EMI amount is also used to repay the loan and thus save interest.

Step-up Loan: This is a type of home loan wherein the borrower pays low EMIs during the initial years of the loan. However, there is a provision to increase the EMI amount over time. This makes loans affordable for young professionals who have just started their career.

Home Loan Eligibility Conditions

Home loan eligibility terms vary among lending institutions and loan schemes. However, the following are the general set of home loan eligibility conditions:

  • Nationality: Resident Indian, Non-Resident Indian (NRI) and Person of Indian Origin (PIO)
  • Credit score: 750 or above
  • Age Limit: 18 – 70 Years
  • Work Experience: At least 2 years (for job profession)
  • How old is the business: At least 3 years (for self-employed)
  • Minimum Salary: At least Rs 25,000 per month (Varies among loan institutions)
  • Loan Amount: Up to 90% of the value of the property

Documents Required for Home Loan

Along with the Home Loan Application Form, you have to give some important documents to the bank / loan institution. These documents are generally the same for all banks and loan institutions. However, certain documents may increase or decrease depending on the specific loan schemes, loan purpose and individual credit profile. The details of the home loan documents required for home loan are given below:

  • Home Loan Application Form
  • Passport size photo
  • Proof of Identity: PAN Card, Passport, Aadhar Card, Voter ID and Driving License (Photocopy of any one)
  • Proof of Age: Aadhar Card, PAN Card, Passport, Birth Certificate, 10th Class Marksheet, Bank Passbook and Driving License (copy of any one)
  • Proof of Residence: Bank Passbook, Voter ID, Ration Card, Passport, Utility Bill (Telephone Bill, Electricity Bill, Water Bill, Gas Bill) and LIC Policy Slip (copy of any one)
  • Income Proof- Copy of Form 16, Fresh Payment, IT Returns (ITR) for last 3 years and Investment Proof (if any)
  • Proof of Income for Self Employed: ITR details for last 3 years, Balance sheet and Profit and Loss account details of Company/ Firm, Business license details and Proof of business address
  • Documents related to the property: NOC from the society/builder, detailed estimate of the cost of the house, registered sale agreement, allotment letter and an approved copy of the building plan

Note: The above list is only indicative and the lending institution may ask for additional documents as well.

Home Loan Fees and Charges

Apart from the interest amount, there are many other fees and charges that banks and NBFCs may charge you at the time of applying for a home loan. Below are some of such fees:

Application Fee: It is charged by the banks or other financial institutions to cover all the initial expenses which are incurred to complete the verification.

Processing fee: This covers the value of credit appraisal and depends on the credit profile, income and home loan plan of the borrower. However, not all banks and other financial institutions charge a processing fee.

Administrative Fee – This is levied by loan institutions that split the processing fee into two parts. The portion levied after the approval of the loan is known as the administrative fee.

Foreclosure fee: This fee is levied when a loan borrower prepays the entire home loan before the loan tenure. Earlier banks or NBFCs used to charge pre-payment penalty and foreclosure fee on home loans, but RBI prohibited banks or NBFCs from charging floating rate home loans along with pre-payment penalty. As far as fixed rate home loans are concerned, some banks levy these charges.

Change of payment mode fee: This fee is levied when the borrower requests his bank to change his existing payment mode during the loan tenure. This fee usually ranges up to Rs 500. It varies from bank to bank and other financial institutions.

Fee for reducing or changing the interest rate: This fee is levied on the borrower when he requests his bank to change or reduce his existing interest rates for various reasons. This fee is charged differently in different banks and is usually up to 2% of the outstanding principal amount.

CERSAI Fee: CERSAI (Central Registry of Securities Asset Reconstruction and Security Interest) is India’s central online security interest registry. Banks and NBFCs check the mortgaged property by visiting the CERSAI website to see if the property has been claimed by any other bank. For this process, banks pay a nominal fee, which they later collect from the borrower.

Additional Charges on EMI: When the borrower is unable to pay the EMI or pays the EMI late, then pays an additional charge on the EMI of the outstanding interest rates. Therefore, EMI should be paid on time.

EMI Bounce Charges: EMI bounce charges are levied when you fail to make timely loan payments due to insufficient funds in your bank account. Banks usually charge Rs 500 in case of bounce. This fee varies from bank to bank.

Legal Fee: This fee is normally included in the processing fee, but some banks charge it separately when they include the form for verification of legal documents of the borrowers.

Franking Fee: It is commonly defined as Stamp Duty, levied by the State Government as a monetary transaction involving the transfer of rights to any property. This amount varies from state to state, and depends on state laws.

How to Apply for Home Loan on Paisabazaar.com

At Paisabazaar.com, you can easily compare home loan offers and apply for it in just three simple steps.

Step 1: Enter the details like cost of property, employment details, your name, email id, date of birth, PAN and pincode.

Step 2: Check out the best home loan offers by top banks and housing finance companies based on your approval prospects. Compare interest rates, processing fees, EMIs and maximum loan amount across various home loan offers. Choose the loan offer that suits you best and enter any additional information that is required.

Step 3: Get instant conditional e-sanction from the loan institution. In addition, our home loan experts will assist you with the processing required for home loan processing and disbursal.

Once you submit your online home loan application on Paisabazaar.com, your chosen loan institution will receive your loan request. Thereafter, the agent of the loan institution will contact you to verify the information provided in the application and proceed with the home loan process.

Factors to keep in mind before choosing a home loan offer

Interest Rate: Some home loan institutions charge fixed and some floating interest rates. Fixed interest rates are considered ideal for loans with shorter tenures, while floating ones are suitable for loans with longer tenures. Some lending banks and NBFCs also offer hybrid home loans in which the borrower can avail both fixed and floating interest rates.

Time taken for loan amount transfer: Home loan disbursal time varies from bank to bank, it usually takes around 10-15 days for loan processing and amount transfer. Choose a home loan company that takes less time and does not cause unnecessary delay in home loan processing.

Loan Eligibility: Home loan eligibility varies from bank to bank. The general home loan eligibility conditions of an individual are determined by age, income, work experience and stability, credit history, etc. To know whether you are eligible for a home loan or not, use the Home Loan Eligibility Calculator.

Additional charges: Loan institutions levy a number of additional charges, such as processing fees, pre-payment or foreclosure charges, etc. It is best to read the terms and conditions of a home loan application before applying so that you do not feel cheated in future.

Terms and Conditions: The list and terms of payment, prepayment, loan transfer and many other home loan related things should also be kept in mind while choosing a home loan.

One Time Loan Payment / Foreclosure

Home loan prepayment occurs when the borrower makes the loan before the loan tenure is over. Pre-payment of the loan helps in reducing the principal amount of the loan, which subsequently reduces the EMI amount. If the borrower does not have any issues with continuing the current EMI amount, he can request his bank to reduce the loan tenure instead of reducing the loan EMI.

On the other hand, home loan foreclosure occurs when the borrower repays the loan in one payment instead of paying it in EMIs before the completion of the loan tenure.

Earlier lending banks and lending institutions used to levy pre-payment penalty and foreclosure charges on floating rate home loans as well, but now RBI has ordered not to levy pre-payment penalty and foreclosure charges on floating rate home loans.

Also Read:

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Home Loan Related FAQ Questions

Question: Which bank is best for home loan?

Answer: Some of the most popular home loan lenders in India are HDFC Bank, SBI, PNB, ICICI Bank, Bank of Baroda, Axis Bank and Canara Bank. However, the best home loan for you will be the one that matches your needs. So, first analyze your needs to get the best home loan. When comparing home loan offers, don’t go for the offer that offers the lowest interest rate, but check out the entire deal. Apart from the interest rate, take into account other factors such as loan repayment and foreclosure policy, processing fees, etc.

To make the home loan search easier, we have listed some of the banks and HFCs along with their offered home loan interest rates and processing charges. Compare home loan rates.

Question: Can I get a home loan for the entire property?

Answer: No, usually banks keep a 20% margin while providing the individuals with the home loan. This means that the bank may agree to provide you 80% of the value of the property as a home loan, while you will have to pay the remaining 20% yourself. In some cases, the bank may agree to provide you up to 90% of the property value as a home loan.

Question: Is there any tax benefit of home loan?

Answer: Yes, both the principal amount of the loan and the interest to be paid towards the loan repayment offer tax benefits under Section 80C and Section 24 of the IT Act.

Question: Who can sign a home loan with me? Can my friend co-sign a home loan for a flat?

Answer: Your family members like father, mother, siblings etc can sign the home loan with you. If you are applying for a home loan, your spouse or adult children can also be a co-signer. In India, as per the extant rules, your friend cannot co-sign the loan because you are not related by blood or otherwise related to you.

Q: How many people can sign a home loan with me?

Answer: At present, 7 people can co-sign a house with the primary applicant. However, all of them must have a blood relation- relative of a family member.

Q: What are the reasons for getting rejected home loan?

Answer: The factors that are one of the major reasons for home loan rejection are as follows:

bad or low credit score
Incorrect personal information on credit reports
Rejection of loan by other banks
unstable income
age
property location
loan repayment capacity

Q: How to avoid home loan rejection?

Answer: The following ways can prove beneficial to avoid home loan rejections:

Credit Score: Maintain a credit score of 750 and above, it is advisable that your application is approved. Banks and loan institutions rely on your credit score before approving your home loan to check your credibility and loan repayment history. Hence, you should always maintain a good credit score to avoid home loan rejections.

Insufficient income: Banks and loan institutions look at your monthly income to see if you will be able to repay your EMIs. It is always advisable to take a home loan with EMIs that do not exceed 40% of your monthly income. Loan institutions have certain minimum income and employment requirements that play a vital role in the loan approval process. Make sure you fulfill all the requirements before applying for a home loan.

Lots of home loan applications in a short span of time: If you apply for a home loan from various loan institutions, it indicates to the banks and loan institutions that you have a credit crunch and there are many ways to fill the gap. Sources need to be applied. The loan institutions think that you will not be able to repay your loan, due to which your home loan application will be rejected.

Existing Loan Portfolio: Currently, if you have multiple loans to repay, your loan institution may think that you will not be able to charge any other EMI on your existing income, which will lead to your home loan getting rejected. Hence, it is better to pay off some of your other loans to reduce your EMI burden than applying for a home loan.

Question: How is the home loan EMI calculated?

Answer: Equated Monthly Installment (EMI) is the amount that you pay every month to pay off the principal amount and interest amount of your home loan. Hence, while calculating home loan EMI, both the principal amount and the interest earned on the loan are taken into account.

Question: Are there any pre-payment fees in case of home loan?

Answer: In the case of floating rate home loans, the loan institutions do not charge a prepayment penalty as per RBI instructions, although a penalty may be levied in case of prepayment of a fixed-rate home loan.

Question: What is Home Loan Balance Transfer?

Answer: Home loan balance transfer is a facility that allows home loan borrowers to transfer their outstanding home loan to a new loan institution for a lower interest rate or new loan terms. Almost all loan institutions provide home loan transfer facility to their customers. Paying off your loan regularly is one of the factors that help you enjoy the loan transfer facility. But before going for home loan balance transfer, do a cost-benefit analysis. Calculate the difference between the interest rates offered by two institutions.

Home loan balance transfer is not an ideal option, if the outstanding loan amount is less if only a few repayment years are left or the difference in interest rate is making normal savings. Also, be sure to check the processing fees of the new institute.

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