Home Loan Interest Rates: Everything About Current Housing Loan Interest Rates In 2022

For 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. 5 crores with interest rates starting at 6.46% p.a. to aid individuals in this pursuit. 

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.

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. 

Download the Navi app now to enjoy competitive home loan interest rates starting from 6.46% p.a. and instant approval through a seamless and paperless process. 

About Home Loan Interest Rates

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)

Lender	Interest Rate	Processing Fee
Navi	6.46% p.a.	Up to 1% of the loan amount
Kotak Mahindra	6.55% p.a.	Up to 0.5% of the loan amount
IDFC FIRST	6.50% p.a.	Rs.5, 000
HDFC Ltd	6.70% p.a.	Up to Rs.5,000
State Bank of India	6.75% p.a.	Up to 0.35% of the loan amount
Bank of Baroda	6.50% p.a.	Up to Rs.25,000
LIC Housing Finance	6.90% p.a.	Rs.10,000 – Rs.15,000
Punjab National Bank	6.50% p.a.	0.35% of the loan amount
UCO Bank	6.90% p.a.	0.15% of the loan amount
Axis Bank	6.90% p.a.	Up to Rs.10,000

Note that 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?

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. 

What Factors Affect the Housing Loan Interest Rates?

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. 

Other loan-related fees: This includes pre-payment charges, application fees, late payment fees, conversion charges or switching fees, collection charges and insurance premiums.

Document-related fees: This can include NOC charges, stamp duty fees, income tax certificate fees, fees for revalidation of NOC, CIBIL Report fees, etc. However, with financial institutions like Navi, you can minimize your cost of borrowing with zero documentation charges. 

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 conduct thorough research of the lending institution, compare different loan offers, and read all the terms and conditions carefully before signing up. 

Frequently Asked Questions

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