Home Loan Interest Rate

When applying for a home loan, you can opt for either a fixed or a floating interest rate. The first, as the name suggests, is fixed beforehand and remains the same throughout the loan tenure. On the other hand, if you choose a floating interest, then the rate will be revised on a quarterly basis. This will be on the basis of the repo rate and other economic factors.

A home loan interest rate has two components: base and markup rates. While paying your home loan interest dues, you will be paying a combination of these variables, i.e., Effective Interest Rate (EIR) = Base Rate + Markup.

The base rate is the standard rate levied against all retail loans and varies as per the lender's policy. The markup rate is the profit markup of the lending institution and varies for each type of loan and the lender.

You can reduce your home loan interest rates in several ways. Enhancing your credit rating and score can help you showcase healthy credit behaviour. This allows lenders to offer you competitive rates. 

You can also apply for government-run housing schemes such as Pradhan Mantri Awas Yojana (PMAY) to get interest subsidies. Availing of a Home Loan Balance Transfer Facility can also help you access lower rates if you have an existing home loan.

The standard NBFC or bank home loan interest rates are fixed by the institution based on their policy, market trends, and the RBI’s rates. It is also dependent on your credit profile and loan terms.

Floating home loan interest rates are those that change during your repayment tenure. The change in your floating rate occurs when there is a change in the lender’s interest rate.

A higher loan-to-value (LTV) ratio typically indicates that the loan amount funds most of the house purchase. This increases the risk the lender is undertaking because if the borrower defaults, the lender will lose significantly.

To calculate the home loan interest rate amount before applying, you can use the home loan EMI calculator. Use it before you apply for the loan, and check the amortisation schedule for the complete and detailed breakup. 

Remember that the result you get using the calculator will be an estimate and may change when you start repaying. However, you can use the tool to compare the rates and choose the best option.

Yes, most lenders allow you to switch from a fixed home loan interest rate to a floating rate and vice versa. Note that you may need to pay a minimal fee for the same.

Yes, under Section 24 of the Income Tax Act, you can claim a deduction from your income of up to ₹2 Lakhs for the interest paid on the home loan in a financial year.