Home Loan Interest Rates: Current Housing Loan Interest Rates In 2022
SWP Calculator: How To Use SWP Mutual Fund Calculator
2 June 2022
Section 80EE Of The Income Tax Act: Tax Deduction On Home Loan Interest
2 June 2022For many Indians, owning a new home is a life-long dream, a sign of achieving financial security and also the biggest financial goal of their lifetime. However, with real estate prices increasing day by day, people generally take the help of a home loan to buy, construct, repair or upgrade their houses. Navi offers home loans up to Rs. 10 crore to aid individuals in this pursuit. However, before taking a home loan, it’s important to compare home loan interest rates and other associated fees and charges offered by different lenders. This could help you make an informed decision before signing up for a home loan.
The following sections will explain everything you might want to know about the home loan interest rates, fees and other charges related to home loans.
Table of contents
- Home Loans: A Brief Introduction
- Home Loan Interest Rates Explained
- Current Home Loan Interest Rates in India (2022)
- What are the Different Types of Interest Rates on Home Loans?
- What Factors Affect the Housing Loan Interest Rates?
- How to Calculate Home Loan Interest Rates?
- Tips to Get Lower Interest Rates on Home Loans
- Other Fees and Charges to Consider
- Final Words
- FAQs on Home Loan Interest Rates
Home Loans: A Brief Introduction
Home loans or housing loans are advances availed by individuals or entities for the specific purpose of buying a house or a plot of land. The property is mortgaged to a lending institution as collateral and is kept till the loan is fully repaid.
In case a borrower cannot repay his/her outstanding loan, the lender has legal rights to recover their dues by selling the property.
Housing loan interest rates can be fixed, floating or partly fixed or partly floating, depending on a lender’s terms and conditions and the needs of a borrower.
Home Loan Interest Rates Explained
The interest rate of a home loan is a certain percentage of the loan principal charged by the lender. The interest rate determines the EMI (equated monthly instalment) of a home loan. Even the smallest reduction in the interest rate could result in substantial savings over time, as home loans typically have long tenures up to 30 years.
Lenders usually offer two types of housing loan interest rate systems – fixed and floating. The EMIs for a floating interest loan change with alterations in the underlying benchmark. Some lenders make adjustments to keep the EMI constant over time, while others base their rates on BPLR (Benchmark Prime Lending Rates).
Current Home Loan Interest Rates in India (2022)
| Lending Institutions | Interest Rates Starting From (per annum) | Processing Fees |
| Navi Home Loans | 7.39% onwards | 1% |
| Kotak Mahindra Bank | 7.50 % onwards | 0.5% |
| Axis Bank | 7.60% onwards | 1% |
| Yes Bank | 8.95% onwards | 1.5% |
| ICICI Bank | 7.60% onwards | 0.5% – 2% |
| HDFC Bank | 7.55% onwards | 0.50% |
| Bank of Baroda | 7.45% onwards | 0.50% |
| Bank of India | 7.40% onwards | 0.25% |
| LIC Housing Finance | 7.50% onwards | Check with lender |
| Federal Bank | 8.55% onwards | 0.50% |
| Union Bank of India | 7.40% onwards | 0.50% |
| Reliance Home Finance | 9.75% onwards | 0.5% – 1% |
Note that this table is only for educational purposes. The current home loan interest rates are subject to change based on the concerned bank’s discretion.
What are the Different Types of Interest Rates on Home Loans?
Here are the different types of home loan interest rates:
Fixed interest rates
For fixed home loan rates, the rate of interest charged on loans remains constant throughout the tenure of the loan. As such, these loans have constant EMIs allowing a borrower to pre-plan his/her repayment.
Fixed interest rates are ideal when you expect market rates to go up in the future. However, if the market interest regime goes down, you may have to pay higher interest, resulting in a higher EMI obligation.
Depending on the type of loan, interest rates may be fixed for the entire tenure or a part of it, as per the lender’s policies.
Also Read: Types Of Home Loan Options Available In India
Floating interest rates
A loan under a floating regime has a home loan rate that keeps changing over the tenure of the loan. It varies with changes in market conditions and the underlying external benchmarks such as the Reserve Bank of India’s repo rates. When the interest rates rise, so does your loan repayment amount and vice versa.
The floating interest rate is made out of two components: index and spread. The index refers to the measure of interest rates based on the underlying benchmark like the repo rate. On the other hand, the spread is the extra amount charged by a financial institution to cover credit risks and profit mark-up.
For instance, if the underlying index is 6% and a financial institution decides on a spread of an additional 2%, the applicable lending rates will be 8%.
Floating interest rates are ideal when the market interest rates are declining. However, if the standard interest rates go up, so do the payable EMIs. The current repo rate as set by the RBI stands at 4.40%.
What Factors Affect the Housing Loan Interest Rates?
Factors affecting home loan interest rates include:
Benchmark rate of lending
Financial institutions can have several types of benchmark lending rates. Most banks follow RBI’s repo rate as an external benchmark while all NBFCs use PLR (Prime Lending Rate) to determine their home loan interest rates.
Credit score
The credit score allows lenders to study the applicant’s past debt repayment records and overall creditworthiness. Having a high credit score means the borrower is more likely to repay his/her loan in time. Hence, the lender could charge them a lower home loan interest rate. In case, your credit score is on the lower side of the spectrum, you can still improve your score by following the best practices.
Applicant’s income
Lenders assume lower credit risks when their borrowers have a high and steady source of income. That’s why salaried applicants at a reputable company will often get better interest rates compared to self-employed individuals.
Condition and location of a property
The location, age, condition, and available amenities of a property also determine its resale value and, thus, the interest on a mortgage loan. A high resale value makes a property lucrative for lending institutions, often leading them to offer lower interest rates.
Also Read: A Brief Introduction To CIBIL Score
How to Calculate Home Loan Interest Rates?
Following are the different methods of calculating the interest rate of a home loan:
Flat rate method
In this method, one calculates the interest rate on the original principal amount. For example, if one borrows a home loan with a tenure of 20 years, he/she will pay a fixed interest rate for the entire tenure.
With this flat rate method, one could calculate the EMI using the following formula:
EMI = (Principal + Total interest)/ loan tenure in months.
Reducing balance method
This method calculates the interest rate on the outstanding amount only. With the reducing balance method, interest is not charged on the principal component already paid with EMIs. As a result, the outstanding balance reduces with time.
One could calculate the EMI under this reducing balance method with the following formula.
EMI = [P x r x (1+r)^n]/[(1+r)^n-1]
Here, P is the principal, r is the rate of interest, and n is the number of instalments.
Also read: How To Plan Loan Repayment
Using a home loan calculator
Financial institutions have their own EMI calculators that facilitate easy calculation of EMIs and a detailed breakdown of interest payments. You can take the help of Navi’s EMI calculator to calculate your monthly and yearly EMIs. Simply enter the loan amount, interest rate, and tenure, and you will get the EMI value.
Tips to Get Lower Interest Rates on Home Loans
Take a look at some tips and tricks you can follow to avail of lower interest rates on home loans:
- Maintain a good credit score, preferably 750 or above, to get the most favourable interest rates.
- You can avail of a joint home loan with your spouse to get a lower interest rate.
- If your current lender charges higher interest rates, you can opt for a home loan balance transfer with another lender offering a lower interest rate.
Other Fees and Charges to Consider
Availing of a home loan often involves payment of various fees and charges.
Processing fees: All financial institutions will charge a small processing fee, sometimes called an administrative fee, to process your loan application. This amount usually varies from 0.25% to 2% of the loan amount or up to Rs. 10,000.
Legal charges: This will likely include legal expenses, valuation fees, MoD of title deed charges, CERSAI charges, etc.
Final Words
When searching for a home loan, a potential borrower should look for the lowest home loan interest rates, the least fees and charges, and the ease of the loan process. Borrowers should always do a thorough research of the lending institution, compare different loan offers, and read all the terms and conditions carefully before signing up.
In case you’re looking for a home loan in India, consider Navi Home Loan. With Navi, you could get home loans up to 90% of the property value at attractive rates starting from 7.39% p.a. Download the Navi app today and turn your dream home into reality!
FAQs on Home Loan Interest Rates
Ans: The home loan interest rate is the percentage of the amount charged by the lender on the home loan. So, if you have a home loan of Rs.30 lakh and the interest rate is 8% p.a., you have to pay the additional amount every month in the form of EMI towards the principal amount as interest.
Ans: You can get the lowest home loan interest rate depending on the following parameters – credit score above 750, stable source of monthly income preferable above Rs.50,000, your relationship with the lender, and repayment capacity, to name a few. However, the final rate will be decided by the lender upon evaluation.
Ans: No. Financial institutions offer different interest rates and loan amounts depending on the credit risk and eligibility of an individual borrower among other factors.
Ans: To get a home loan, an applicant needs to be within a certain age bracket, usually 21 to 65 years, during the tenure. They will also need to have a steady source of income that can easily cover the home loan EMIs. A credit score over 750 is also desirable to get the best available loan rates.
Ans: To apply for a home loan with Navi, simply download the Navi app from Google Play or App Store. Then submit the property details, check eligibility with PAN and other basic details and get instant approval.
Before you go…
Are you looking to buy that house you’ve been eyeing 🏠 and you need a loan of up to ₹10 crore. Install the Navi app now and get instant in-principle approval right away! Interest rates starting at 7.39% p.a.
Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
